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What You Need to Know About Nebraska’s Inheritance Tax

Did you know that Nebraska is one of only six states in the United States that has an inheritance tax?  What exactly is an inheritance tax?

Well, according to Nebraska law (almost) all property that passes by Will or by intestate laws (i.e. if there is no Will) from a Nebraska resident, or a person who had property within the state of Nebraska, is subject to an inheritance tax.  In short, when a loved one dies and you inherit their property, you may be subject to an inheritance tax on that property.  The burden of paying Nebraska’s inheritance tax ultimately falls upon those who inherit the property, not the estate.

Beneficiaries inheriting property pay an inheritance tax over the value that exceeds their exemption amount, which ranges between $10,000 and $40,000.  That exemption amount, and the underlying inheritance tax rate, varies based on the inheritance category the beneficiary falls into: (1) Close Relatives ($40,000 exemption); (2) Remote Relatives ($15,000 Exemption); or (3) All Other Transfers ($10,000 exemption).  The table below breaks down examples of beneficiaries from these three categories:

Relationship to Decedent

Tax Rate

Surviving Spouse Always Exempt
Father/Mother 1%
Grandfather/Grandmother 1%
Brother/Sister 1%
Son/Daughter 1%
Legally adopted child/children 1%
Person standing as a parent 1%
Uncle/Aunt 13%
Niece/Nephew 13%
Other lineal descendants of the same 13%
All others (i.e. friends, neighbors, etc.) 18%
Charitable Organizations Usually exempt

 

Here’s an example:  Patricia dies in Nebraska where she was born and raised.  Her estate is worth $250,000.  Patricia’s husband inherits $125,000.  Patricia’s son inherits $50,000.  Patricia’s nephew inherits $15,000.  Patricia’s long-time friend inherits $60,000.  This is what the inheritance tax break down should look like:

  1. Patricia’s husband, as a surviving spouse, would owe nothing because he is exempt from the inheritance tax.
  2. Patricia’s son, as a close relative, would owe 1% of $10,000, as the first $40,000 is not taxable. He would owe $100.
  3. Patricia’s nephew, as a remote relative, would owe nothing because he inherited $15,000 which is the amount of his inheritance tax exemption.
  4. Patricia’s long-time friend, as the other transferee, would owe 18% of $50,000 ($60,000 less the $10,000 exemption). She would owe $9,000.

Beneficiaries who owe inheritance tax must pay the tax within twelve months after the death of the decedent.  The tax is  usually paid to the county where the decedent lived.

When a loved one dies, it can be extremely difficult and overwhelming.  For assistance with Nebraska’s inheritance tax and other estate planning or probate concerns, contact Berkshire & Burmeister’s experienced estate planning and probate attorneys.

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