JOHNSON FINANCIAL GROUP PSC CORBIN KY

UNDERSTANDING TODAY'S FINANCIAL ENVIRONMENT

I’m Gary Johnson, a financial professional in Corbin, Kentucky. We understand that individuals face unique challenges as they prepare for retirement. We can help take the mystery out of preparing for today and tomorrow. Whether your goal is saving for retirement, college savings, or estate strategy, our personalized service focuses your needs, wants, and financial goals and objectives.

Our firm is the successor to the tax and accounting practice formerly known as Rose Bookkeeping, Inc. The business has been in operation since the 1950's and is somewhat of a Corbin landmark. The current practice was purchased in the 1990's from Bruce E Smith, who was a retired IRS agent and an Enrolled Agent.

Our professionals have years of experience in financial services. We can help you address your needs of today and for many years to come. We look forward to working with you through all stages of your life, please call (606) 528-4020.

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KY Inheritance Tax Law Update

Kentucky's inheritance tax just got friendlier to a very common estate planning scenario: childless clients leaving assets to their nieces and nephews.

HB 869, signed by Governor Beshear on April 27, 2026, amended KRS 140.070 and 140.080 to move nieces, nephews, and nieces and nephews of the half-blood from Class B to Class A. Class A beneficiaries are fully exempt from Kentucky inheritance tax. The change applies to estates of decedents who die on or after January 1, 2026.

The estate planning conversation just changed. Here's the practical impact.
What This Actually Saves
-Under prior law, a niece inheriting from her aunt was a Class B beneficiary: $1,000 exemption, then a graduated rate from 4% to 16% on everything above that.
-On a $400,000 inheritance, that worked out to roughly $54,800 in Kentucky inheritance tax. On a $250,000 inheritance, around $30,800. Real money, and money that came out of the niece's pocket at distribution.
-That tax is gone for deaths on or after January 1, 2026. Half-blood nieces and nephews are explicitly included, which closes a gap that existed under prior law.

Effective Date and Look-Back
The bill carries an emergency clause, so it became law when Beshear signed it on April 27, 2026. The inheritance tax provisions, though, apply to estates of decedents dying on or after January 1, 2026.

Two practical consequences flow from that.
-First, the date that controls is date of death, not the date probate opens or the date a return gets filed. Open probate, closed probate, filed return, unfiled return — none of that matters. What matters is when the decedent died.
-Second, for the early part of this year, there's a real refund opportunity. If a Kentucky Inheritance Tax Return (92A200) was filed treating a niece or nephew as Class B for a death anywhere from January 1, 2026 forward, the return can be amended. If she was the only non-Class A beneficiary in the estate, the executor can usually skip the 92A200 entirely and file an Affidavit of Exemption under KRS 395.605. KRS 134.580 gives a four-year window to recover any overpayment.

Planning Moves to Have on Your Radar
A few implications worth flagging:
-Childless decedents with nieces and nephews. This is the headline group. Many of these plans structured around the old Class B treatment with life insurance, lifetime gifts, or charitable bypasses. The structures often still make sense for other reasons, but the inheritance tax pressure that drove some of them is gone. Worth a fresh look at the plan.
-Per stirpes language reaching down to grandnieces and grandnephews. Read the documents carefully. HB 869 covers nieces and nephews. It does not extend to grandnieces and grandnephews. If a niece predeceases and her share passes to her child by representation, that grandniece is still a Class C beneficiary at 6% to 16% on amounts over $500.
-Half-blood nieces and nephews. Explicitly covered by the new language. If a decedent has a niece or nephew from a half-sibling relationship, that beneficiary now gets full Class A treatment.
-Step-nieces and step-nephews. Not covered. Kentucky's inheritance tax classification uses consanguinity, and step relationships don't carry the same treatment. If a client wants a stepchild's child treated equivalently to a biological niece or nephew, that's a planning conversation, not a statutory result.
-Estates with mixed beneficiary classes. A common pattern: most beneficiaries are immediate family, but the residuary includes a cousin, an in-law, or a longtime friend. Class B (aunts, uncles, in-laws, certain great-grandchildren) and Class C (everyone else) are unchanged. The tax still applies to those interests at the same rates as before. The 92A200 still gets filed.

Adult adoption as a planning tool just got narrower. This one is not HB 869, but it sits right next to it and you need to know about it. SB 50, the 2026 omnibus probate and trust bill, amended KRS 199.520(2) to add a new restriction: an adult adoptee is deemed the child of the adoptive parent for inheritance and succession purposes only if the adoptee resided in the household of the adoptive parent prior to age 18. Pre-SB 50, an adult adoption made the adoptee a child for all inheritance purposes, period. After SB 50, the household-before-18 requirement kicks in. If you have clients who used or are considering adult adoption to bring a stepchild, partner, or non-relative into intestate succession or Class A inheritance tax status, that strategy now has guardrails. Note: SB 50 takes effect this summer under the default 90-day rule, not on signing. HB 869's emergency clause put it into effect immediately. Two different timelines.

A Quick Reference for Who's Class A Now
After HB 869, Class A includes:

Surviving spouse
Parent
Child by blood
Stepchild
Child adopted during infancy
Child adopted during adulthood who was reared by the decedent during infancy
Grandchild who is the issue of any of the above categories of children
Brother and sister (including half-blood)
Niece and nephew (including half-blood) (new under HB 869)

All fully exempt from Kentucky inheritance tax under KRS 140.080.

Bottom Line
For the childless client with nieces and nephews as natural objects of bounty, Kentucky just removed a meaningful drag on the plan. For clients with more complicated beneficiary structures, the rest of the inheritance tax framework is unchanged, and the planning analysis is the same as it always was.