When a person passes away in Kentucky, their estate must go through the probate process. This process includes determining the value of the decedent’s gross estate. The gross estate encompasses all the assets owned by the decedent at the time of death, which will be subject to estate tax calculations.
It is essential to know which transactions and assets the courts use to ensure accurate estate planning and tax compliance.
Real estate and bank accounts
Real estate owned by the decedent, whether located in Kentucky or another state, forms a significant part of the gross estate, which may be taxable. This includes residential properties, commercial properties, and any other real estate holdings. The gross estate also includes bank accounts, including checking and savings accounts, as well as certificates of deposit.
Investments and retirement accounts
Investments such as stocks, bonds, and mutual funds contribute to the estate’s total value. Retirement accounts, such as IRAs and 401(k)s, also count toward the gross estate unless they have named beneficiaries.
Life insurance policies and personal property
If the decedent owned life insurance policies, the proceeds from these policies typically count towards the gross estate if the decedent had any incidents of ownership at the time of death. The gross estate valuation also includes personal property, such as vehicles, jewelry, art, and collectibles.
Transfers before death
Certain transfers made by the decedent before their death can become part of the gross estate. For example, if the decedent gave away property but retained some control or interest in it, the value of that property might become part of the gross estate. Additionally, any gifts made within three years of the decedent’s death could become part of the gross estate if they exceed the annual gift tax exclusion.
The Internal Revenue Code (IRC) provides detailed rules on what constitutes the gross estate, including the inclusion of certain transfers and gifts.
Navigating Kentucky’s estate inclusions
Kentucky follows federal guidelines for estate tax purposes, so planning around estate tax laws is crucial. Understanding what is included in your gross estate can help you organize your estate plan.