Inheriting a house is a lot to carry while you are also grieving. The good news is that the steps in Kentucky are fairly clear once you know who has the right to sign. This page covers the order things usually happen in, in plain English.
Step one: find out who can sign
Who can sell the house depends on how it was passed on.
If there is a will, it has to be proven in the district court of the county. The court then confirms the person in charge of the estate. That person is called the personal representative, or executor if the will names them. If there is no will, or no one named in the will can serve, the court appoints one, called an administrator.
A will can tell the personal representative to sell the house. When it does not, the personal representative generally needs court approval before selling the real estate. So do not sign a listing agreement or a contract before you know which situation you are in.
If there was no will
When someone dies without a will and the house passes to the heirs, Kentucky uses a paper called an affidavit of descent, or affidavit of heirship. County clerks describe it the same way. It is filed with the county clerk where the property sits, under KRS 382.120. It lists each heir, their age and address as far as is known, how each is related to the person who died, and the share of the property each one inherited.
Without that paper on file, a buyer's title company will usually not be able to close. Ask a probate attorney to prepare it.
Who owes Kentucky inheritance tax
Kentucky has no estate tax, but it does have an inheritance tax, which is paid by the person who receives the property. Heirs are sorted into three groups:
Class A: surviving spouse, parent, child, grandchild, brother, sister, half-brother and half-sister. For deaths after June 30, 1998, Class A heirs owe no inheritance tax.
Class B: includes nieces, nephews, aunts and uncles. They get a $1,000 exemption, and the tax rate runs from 4 percent to 16 percent.
Class C: everyone else, including cousins and friends. They get a $500 exemption, and the rate runs from 6 percent to 16 percent.
If every heir is in Class A, no inheritance tax return is needed. If anyone owes tax, a return is filed with the Kentucky Department of Revenue, due 18 months after the date of death. The department's own guide explains the classes and the rates.
Taxes when you sell
For federal income tax, the home's value on the date the person died generally becomes your starting point for figuring profit. If you sell soon after for about that value, there is often little or no profit to tax. Keep the date-of-death appraisal, because your CPA will want it.
When you sell, the Kentucky transfer tax applies as it does for any sale: fifty cents per $500 of the price, paid by the seller. The math is in How Much Is the Kentucky Real Estate Transfer Tax?
Before you list
Get a market valuation and, for tax purposes, an appraisal as of the date of death.
If there are several heirs, get everyone's agreement on price and timing, in writing.
Decide whether to clean out and repair the house or sell it as is. Selling as is can be faster, and it usually brings a lower price.
Budget for the costs of holding the house while you wait: property taxes, insurance, utilities and upkeep.
Where the market is now
To see what homes are selling for, read What Is the Median Home Price in Louisville? For every cost on the seller's side, see How Much Are Closing Costs in Louisville, Kentucky? and Is Louisville a Buyer's Market or a Seller's Market? for timing.
For a longer walk through the probate side, see the Winner Realty guides to selling an inherited house in Kentucky and selling a house after the death of a spouse.
This is general information, not legal or tax advice. Talk to a Kentucky probate attorney before you sign anything. Questions about the sale side? Text or email me at (502) 305-8915 or [email protected].
Rob Bergeron, Owner-Realtor, Winner Realty