Exemptions of inheritable interests

(1) The following exemptions chargeable against the lowest bracket or brackets of inheritable interests shall be free from any tax under the preceding provisions of this chapter: (a) Surviving spouse, total inheritable interest. Effective as to decedents dying after August 1, 1985, notwithstanding anything in this chapter to the contrary, if the decedent's personal representative (or trustee or transferee, absent a personal representative) shall so elect, the spouse's inheritable interest shall include the entire value of any trust or life estate which is in a form that qualifies for the federal estate tax marital deductions under 26 U.S.C. sec. 2056(b)(5) or (7), as amended through December 31, 1984, regardless of whether or not the federal estate tax marital deduction is elected by the decedent's personal representative. To be valid, the election referred to in the sentence immediately preceding must be made in the form prescribed by the Department of Revenue and must be filed on or before the due date of the tax return, including extensions, or with the first tax return filed, whichever last occurs; (b) Class A beneficiaries, as defined in KRS 140.070, total inheritable interest; (c) All persons of Class B, under KRS 140.070, $1,000; and (d) All persons of Class C, under KRS 140.070, $500. (2) If the decedent was not a resident of this state, the exemption shall be the same proportion of the allowable exemption in the case of residents that the property taxable by this state bears to the whole property transferred by the decedent.