Buying from heirs in Kentucky: the paperwork that decides if it closes

Buying from heirs in Kentucky: the paperwork that decides if it closes

Real Estate Agent · Louisville, KY · Member since 2017 · 1k+ posts · 1k+ votes

A lot of the off-market deals I see start with an inherited house. And a lot of them die at the title company, not at the kitchen table, because nobody figured out early who actually has the right to sign.

Here's the Kentucky version, for anyone buying from heirs or helping a family sell. I'm not an attorney, and every one of these should go through a probate attorney.

1. Figure out who can sign before anybody signs anything.

  • If there's a will, it gets proven in the district court of the county, and the court confirms the personal representative (the executor, if the will names one).

  • No will, or nobody named can serve? The court appoints an administrator.

  • If the will tells the personal representative to sell, good. If it doesn't, they generally need court approval to sell the real estate. Don't take a contract from someone who can't deliver it.

2. No will? Ask about the affidavit of descent on day one.

When someone dies without a will and the house passes to the heirs, Kentucky uses an affidavit of descent (some clerks call it an affidavit of heirship). It's filed with the county clerk where the property sits under KRS 382.120, and it lists every heir, their age and address as far as known, how they're related, and each person's share. Without it on file, the title company usually can't close. If it hasn't been filed yet, that's your real timeline.

3. Every heir is a seller.

Four siblings inherit, that's four signatures. Get everyone's agreement on price and timing in writing early. The sibling who lives out of state and doesn't answer the phone is how a 30-day close turns into six months.

4. Kentucky has an inheritance tax, not an estate tax. It's paid by whoever receives the property:

  • Class A (spouse, parent, child, grandchild, brother, sister, half-siblings): owe nothing for deaths after June 30, 1998.

  • Class B (nieces, nephews, aunts, uncles): $1,000 exemption, 4% to 16%.

  • Class C (everyone else, including cousins and friends): $500 exemption, 6% to 16%.

If anyone owes, the return is due 18 months after the date of death. A niece inheriting from her aunt has a real tax bill that a son inheriting from his mom doesn't. That changes motivation and timing.

5. The tax side of selling is usually lighter than heirs fear. For federal income tax, the value on the date of death generally becomes their starting point. Sell soon after for about that value and there's often little or no gain. Tell them to keep the date-of-death appraisal for their CPA.

6. Be straight about holding costs. Property taxes, insurance, utilities, lawn care, a vacant house through a Kentucky winter. Heirs who live out of state feel every month of it. A clean as-is offer with a realistic close date often beats a higher number with a list of repair asks. And be a human about it. These folks are usually grieving.

Small one: Kentucky transfer tax is 50 cents per $500 of the price, paid by the seller, same as any sale.

For those of you who work probate regularly: how do you handle the heir who won't respond? And do you wait until the court appoints someone, or build the relationship with the family earlier?

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  • Accountant · San Francisco, CA · Member since 2026 · 121 posts · 75 votes
    18h

    Hi Rob, great post. One add on point 5 since it's the one people get backwards , as I am a CPA here, not a lawyer, same disclaimer as you. Inherited property is long-term automatically, doesn't matter if they sell next week. So an heir sweating short-term rates doesn't need to be. On the date-of-death value: sell within a year or so and the sale price basically becomes that value, so there's almost no gain left to tax. An appraisal earns its keep when the sale drags out or they fix the place up first, because then the sale price and the date-of-death number drift apart. Get it while comps are close. The useful bit is what you tell the family. Most heirs assume they are about to get taxed into oblivion and they are usually nowhere close. The step-up wipes most of the gain, so a fair as-is offer lands easier once they get that.

  • Ashish AcharyaBusiness Member
    CPA, CFP®, PFS · Sarasota, FL · Member since 2017 · 5k+ posts · 3k+ votes
    5h

    Rob, this is a great checklist, especially the point about getting the ownership and signing authority sorted out before a buyer gets too far into the transaction.

    One tax piece I'd add is the importance of documenting the property's fair market value as of the date of death.

    For an inherited property, that date-of-death value can be extremely important when the heirs eventually sell because it can materially affect the gain they report. I'd want the heirs to keep the appraisal or other documentation supporting that value rather than trying to reconstruct it years later.

    I'd also separate the Kentucky inheritance-tax question from the federal income-tax question. They're different issues, and the fact that an heir may owe or not owe Kentucky inheritance tax doesn't necessarily tell you what their federal tax outcome will be when they sell the property.

    For anyone buying from heirs, I'd want the title/probate side handled by the appropriate attorney and the tax basis side reviewed with the CPA before closing.

    Curious, Rob, do you find that most of the heirs you're working with already have a date-of-death valuation, or is that something that usually gets addressed only after they're ready to sell?

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