Efficient House Transfer to Heirs in KY

[Mark S.]

Scenario: Remarriage later in life. Surviving spouse now owns house outright. Future 50/50 split desired to both sides of family upon surviving spouse's death. Current will states 50/50 split upon surviving spouse's death to each side of family. Considerations/Questions: 1.) House not owned by a trust. Would this be a better way to pass house down in Kentucky to avoid probate? 2.) Utilizing life insurance to "buy out" other side of family. Surviving spouse dies, beneficiary receives tax-free death benefit, beneficiary has option to "buy out" other side of family based on FMV of house at that time. What would be the best way to set this up? ILIT? Surviving spouse is owner/insured and premiums are gifted by beneficiary (keeping them under the annual gifting exclusion limits)? 3.) Do beneficiaries receive "stepped up" basis at surviving spouse's death to FMV at that time? 4.) If none of the above options are chosen, how would it work in terms of actually selling the house? Do both 50/50 sides of family have to be involved in the transaction? Yes, I know to consult with estate planning attorney, accountant, etc., however, I just want to bounce some thoughts/ideas around beforehand to those here. Thanks in advance for your responses.