Updated October 8, 2026. Quick answer: Not by default. Kentucky is a common law state, but the Kentucky Community Property Trust Act lets spouses opt in: “spouses may classify any or all of their property as community property” through a qualifying trust (KRS 386.620 to 386.624, effective July 15, 2020). The IRS lists nine community property states.
Kentucky community property at a glance
| Item | What the documents say |
|---|---|
| Regime | Common law; opt-in community property trust |
| At divorce | Property in a community property trust: one-half to each spouse unless both agree otherwise in writing (KRS 386.624). Outside a trust: just proportions (KRS 403.190) |
| At a spouse’s death | Property in a community property trust: one-half is the survivor’s share and one-half the decedent’s (KRS 386.624). Outside a trust: KRS 392.020, amended effective July 15, 2026 |
| Federal basis at the first death | Open: IRS Publication 555 does not address the federal treatment of the election in this state’s trust |
| Source | Kentucky General Assembly (apps.legislature.ky.gov); IRS Publications 551 and 555; 26 U.S.C. 1014 |
What the Kentucky statutes say
Kentucky’s opt-in is the Community Property Trust Act, KRS 386.620 to 386.624, which the legislature’s pages show as effective July 15, 2020. Section 386.622 lets spouses classify property as community property by transferring it to a trust that says so, and it applies even when “or neither spouse is domiciled in this state”, provided the trust has a qualified trustee.
How the opt-in trust works in Kentucky
- The trust “Expressly declares that the trust is a Kentucky” community property trust (KRS 386.622(1)(a)).
- At least one trustee is a qualified trustee, and “Both spouses or either spouse may be a trustee;” (KRS 386.622(1)(b)).
- A qualified trustee is “A natural person who is a resident of this state” or an in-state bank or trust company (KRS 386.620).
- The trust “Is signed by both spouses” and opens with the statutory notice about the consequences of the trust (KRS 386.622(1)(c) and (d)).
At divorce in Kentucky
On dissolution, KRS 386.624 ends the trust and the trustee distributes one-half to each spouse, unless both agree otherwise in writing: the section says “the trustee shall distribute one-half (1/2) of the trust assets”. For property outside a trust, KRS 403.190 has the court “divide the marital property without regard to marital misconduct in just proportions”.
At a spouse’s death in Kentucky
At a spouse’s death, KRS 386.624 provides that one-half of the trust’s value “shall reflect the share of the surviving spouse” and the other one-half is the decedent’s. For property outside a trust, the survivor’s default rights are in KRS 392.020, which the legislature’s page shows as “Effective: July 15, 2026” after a 2026 amendment.
What it does to basis when the first spouse dies
The federal rule for community property in a trust is not settled by the documents read. IRS Publication 555, the IRS’s guide to community property, says it “doesn’t address the federal tax treatment of income or property” subject to the community property election under the laws of Alaska, Tennessee and South Dakota. The statute that gives community property a new basis for the survivor, 26 U.S.C. 1014(b)(6), refers to “property which represents the surviving spouse’s one-half share of community property” held under the community property laws of a State.
What the state statute fixes is the split. As a computed illustration, if a Kentucky couple placed $400,000 of shares in a qualifying trust and the trust held it at a spouse’s death, the survivor’s one-half share is half of that value, or $200,000. Whether the whole $400,000 gets a new basis at that death is the open federal question; CMG’s page on community property trusts and the IRS covers it. On the same facts, a common law qualified joint interest would give the survivor a basis equal to the total of $200,000 plus $50,000, which is $250,000.
What the documents do not say
- What KRS 392.020 said before its July 15, 2026 amendment was not retrieved, so this page does not describe the change.
- The documents read do not say how the federal tax rules treat property in a Kentucky community property trust at the first spouse’s death.
- IRS Publication 555 names Alaska, Tennessee and South Dakota in its note on the election and does not name Kentucky.
Common mistakes
- Reading the 2026 change to KRS 392.020 as a change to the trust act; the trust act’s pages show a July 15, 2020 effective date.
- Assuming the answer in this state settles it for a couple who move; the rules depend on the state where the spouses are domiciled and, for property in a trust, on the trust.
Related: community property states by state, community property trusts and the IRS, Kentucky retirement taxes, and Kentucky probate cost.
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Answer againSources
- KRS 386.622 Arrangement between spouses involving community property considered a community property trust (Kentucky Revised Statutes): https://apps.legislature.ky.gov/law/statutes/statute.aspx?id=49989
- KRS 386.624 Satisfaction of obligation of one or both spouses from community property trust: Distribution of assets upon death of spouse or dissolution of marriage (Kentucky Revised Statutes): https://apps.legislature.ky.gov/law/statutes/statute.aspx?id=49990
- KRS 386.620 Definitions for KRS 386.620 to 386.624 (Kentucky Revised Statutes): https://apps.legislature.ky.gov/law/statutes/statute.aspx?id=49988
- KRS 403.190 Disposition of property (Kentucky Revised Statutes): https://apps.legislature.ky.gov/law/statutes/statute.aspx?id=1452
- KRS 392.020 Surviving spouse’s interest in property of deceased spouse (Kentucky Revised Statutes): https://apps.legislature.ky.gov/law/statutes/statute.aspx?id=57666
- IRS Publication 551, Basis of Assets (December 2025): https://www.irs.gov/pub/irs-pdf/p551.pdf
- 26 U.S.C. 1014, Basis of property acquired from a decedent (United States Code, 2024 Edition): https://www.govinfo.gov/link/uscode/26/1014?link-type=html
- IRS Publication 555, Community Property: https://www.irs.gov/pub/irs-pdf/p555.pdf
Sources: the primary documents linked above, read on October 8, 2026. General information, not tax advice. Your own facts decide the outcome, and a tax professional or the state agency itself is the right place to confirm anything consequential.