KRS 140.030 — Taxation of contracts in contemplation of death -- Proceeds of life insurance policies -- Exemptions

(1) If it appears, either from the will of the decedent or from extrinsic evidence, that an
obligation of a contractual nature exists in favor of any person payable at or after
death of the decedent, the sum so payable shall be treated for the purposes of this
chapter as a taxable transfer, unless it affirmatively appears by competent evidence
that a consideration substantially equivalent in value to t he amount due under the
contract was paid or furnished by or for the other party thereto during the life of the
decedent.
(2) The proceeds payable under any life insurance policy on the death of the assured
(other than a United States government life insur ance policy or national service life
insurance policy issued by or through the federal government), payable to the
assured or his estate, shall be taxable as a part of the legacy as a distributable share
of the beneficiary. The proceeds of an insurance pol icy payable to a designated
beneficiary, including a testamentary or inter vivos trustee, other than the assured or
his estate, shall be tax -free. The proceeds payable under any United States
government life insurance policy or national service life insura nce policy issued by
or through the federal government, whether payable to a designated beneficiary or
to the assured or his estate, and any pension or annuity payments made or to be
made to the surviving spouse of an employee of a railroad or other carrie r under the
Federal Railroad Retirement Act of 1935 as amended, shall be tax -free, and shall
not be considered in determining the value of any taxable transfer.