Whether an amount received from an estate is taxable depends on what the payment represents.
A nontaxable inheritance, such as funds inherited from a bank account, would not be reportable on Form 1099-NEC. This form is used to report compensation for services rendered as an independent contractor or nonemployee. If your spouse was paid by the estate for services rendered as an executor, that payment would be taxable, including for Kentucky. Individual Income Tax is due on all income earned by Kentucky residents and all income earned by nonresidents from Kentucky sources.
Kentucky allows a pension exclusion of $31,110, and excludes Social Security from income tax. Distributions from retirement accounts of the decedent should be reported on Form 1099-R. If you enter an amount received as from a retirement plan on Form 1099-R, TurboTax will determine whether it meets the criteria for exclusion from Kentucky income. See this help article for more information on Form 1099-R.
Check with the payer if you are uncertain about the reason for the payment reported on Form 1099-NEC. For more information on Forms 1099-NEC, see this TurboTax article.
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