What Is The Nebraska Inheritance Tax? - FAQ

The Nebraska Inheritance Tax is a form of wealth transfer tax that is unique to the state of Nebraska.

The Inheritance Tax is paid at the county level.  The process is typically an informal court proceeding through the probate court in the county in which the decedent passed away.  The Nebraska Inheritance Tax can serve as a lien on certain property owned in whole or in part by the decedent.

Some typical assets that make up an estate (probate, or otherwise) include, but are not limited to:

  • real estate
  • stocks
  • bonds
  • checking accounts
  • savings accounts
  • CD’s
  • money market accounts
  • cash
  • life insurance (payable to the Estate)
  • joint property
  • miscellaneous tangible personal property and household effects
  • refunds
  • ownership in business entities (“S” corporations, LLC’s, partnerships, sole proprietorships, etc.)
  • assets held in trust
  • certain powers of appointment
  • annuities
  • IRA’s
  • 401(k)’s
  • Roth IRA’s

Certain allowances, exemptions, and deductions are available in the Nebraska Inheritance Tax determination.

1) With respect to the Allowances, estates are allowed a Homestead Allowance pursuant to Neb. Rev. Stat. §30-2322.

The Homestead Allowance is specifically applicable to a surviving spouse of a decedent who was domicile in Nebraska. Currently, the Homestead Allowance is $20,000, but the statute has periodically changed over the years.  If there is no surviving spouse, the Homestead Allowance is then available to minor children and dependent children of the decedent.

2) Another allowance is the Exempt Property Allowance.

This allowance is governed by Neb. Rev. Stat. §30-2323.  This allowance is in addition to the Homestead Allowance.  The Exempt Property Allowance is applicable to a surviving spouse of a decedent who was domiciled in Nebraska.  Currently, the Exempt Property Allowance is $12,000, but again, the statute has periodically changed over the years.  If there is no surviving spouse, the Exempt Property Allowance is then available to children of the decedent.

3) The third and final allowance is the Family Maintenance Allowance.

This allowance is pursuant to Neb. Rev. Stat. §30-2324.  This allowance is in addition to the Homestead Allowance and the Exempt Property Allowance.  The Family Maintenance Allowance is applicable to the surviving spouse, minor children of the decedent (whom the decedent was obligated to support), and children who were in fact being supported by the decedent.  The maximum amount of the Family Maintenance Allowance is currently $20,000, but as is the case with the other allowances, the statute has periodically changed over the years.

Deductions available in an Inheritance Tax determination include, but are not limited to:

  • funeral expenses
  • attorney fees
  • Personal Representative’s Fees
  • court costs and recording fees
  • publication costs (if there is a probate proceeding)
  • bond (if applicable)
  • administration expenses (an extensive list is beyond the scope of this presentation)
  • certain expenses concerning property not subject to probate (typically, trustee fees, and costs of any trust administration)
  • expenses of last illness of the decedent (within 6 months of death), and debts of the decedent (if the decedent was liable for such debt at date of death).

In addition, surviving spouses, pursuant to Neb. Rev. Stat. §77-2004, are allowed an unlimited Marital Exemption.

This essentially ensures that a surviving spouse will not owe any Inheritance Tax whatsoever for any interests that pass directly from the decedent to a surviving spouse.  The Marital Exemption may apply to joint property, probate property, other property (POD, beneficiary designations, etc.).  It is important to note with respect to trust property in which the spouse maintains a life interest in the trust property, but others are the beneficiaries of the remainder interest, only the life interest of the trust property applies to the Marital Exemption.

If a decedent’s estate is subject to Federal Estate Tax, the amount of Federal Estate Tax attributable to Nebraska property subject to Inheritance Tax serves as a deduction for the Inheritance Tax determination (and vice versa).

Additionally, if the decedent’s Will or Trust Agreement (or other beneficiary designation) provides for property to pass to a charity, the decedent’s estate is entitled to a Charitable Deduction for Inheritance Tax purposes.

While a surviving spouse is entitled to an unlimited marital deduction/exemption, currently, a $100,000 exemption is available to inheriting parents, grandparents, siblings, children (adopted or otherwise), and grandchildren.  This exemption is applicable to “immediate relatives.”

With respect to uncles, aunts, nieces, nephews (or lineal descendants of the same), or the spouses of such are currently entitled to an exemption of $40,000.  This exemption is applicable to “remote relatives” and is governed by Neb. Rev. Stat. §77-2005.

All other persons inheriting from a decent that do not fit the definition of a surviving spouse, immediate relative, or remote relative, are categorized as “Other Transfers.”  Pursuant to Neb. Rev. Stat. §77-2006, Other Transfers currently receive an exemption of $20,000.

The Nebraska Inheritance Tax itself is based on each type of beneficiary.

As previously stated, surviving spouses are exempt from Inheritance Tax and accordingly, their tax rate is 0%.  Pursuant to Neb. Rev. Stat. §77-2004, a parent, grandparent, sibling, child (adopted or otherwise), or grandchild are taxed at 1%.  This Inheritance Tax rate is applicable to “immediate relatives.”

The Inheritance Tax rate for uncles, aunts, nieces, nephews (or lineal descendants of the same), or the spouses of such (“remote relatives”) is currently 11%.  Again, the statutes relating to the Nebraska Inheritance Tax have changed over the years.

The Inheritance Tax rate for “Other Transfers” is currently 15%, but again, it is mindful to follow the statutes in place at the time of a decedent’s death.

After accounting for the assets, allowances, deductions, and exemptions applicable to a Nebraska Inheritance Tax determination, the Inheritance Tax is calculated for each beneficiary and then summed up in total.  If tangible property is owned in multiple counties, the Inheritance Tax is apportioned among the counties involved.

After calculating the Inheritance Tax, each applicable County Attorney must then approve and sign off on the Inheritance Tax determination, as well as the related court pleadings.  Once that is complete, the Inheritance Tax determination, along with the pleadings, are then filed with the probate court in the county of the decedent’s domicile.

After the court approves the filing, the Judge will issue an Inheritance Tax Order.  The Estate can then take the order to the County Treasurer and pay the Inheritance Tax.  The County Treasurer then issues a Receipt.  The Receipt is used to extinguish any and all Nebraska Inheritance Tax liens.

The Nebraska Inheritance Tax is due one (1) year after the date of death of a decedent.

Interest accrues at a statutory rate if satisfied thereafter.  In many cases, families may opt to pay the Inheritance Tax in advance of the due date in effort to resolve any Inheritance Tax liens and for overall closure.

As previously stated, the Nebraska Inheritance Tax is a legal proceeding.  Accordingly, an attorney will need to file the Inheritance Tax pleadings with the Court.

Frequently Asked Nebraska Inheritance Tax Questions

Question: My mother passed away this month and my father predeceased her several years ago.  My mother lived in Lincoln, Nebraska.  They had a house, a brokerage account, a checking account, a savings account, and an IRA.  They had no debt.  The total value of their assets amounted to $600,000.  My brother, sister, and me are the beneficiaries of everything.  Do we owe Nebraska Inheritance Tax.?

Answer: Yes.  Since your brother, sister, and you are considered direct relatives, your respective Inheritance Tax rate is 1%.  You are also collectively allowed Exempt Property Allowance of $12,000 ($4,000 each).  Each of your brother, sister, and you, are also afforded a $100,000 exemption.  Excluding any available deductions, the collective Nebraska Inheritance Tax will approach $2,880.  Qualifying deductions will help reduce the Inheritance Tax.  The Inheritance Tax is due in Lancaster County, Nebraska one-year after the death of your mother.

Q: My father passed away and my mother and I (their daughter) survived him.  My father and mother lived in Omaha, Nebraska.  I live in Los Angeles, California.  My father’s Will provides for everything to pass to my mother.  My mother’s Will leaves everything to me.  My father and mother jointly owned a house, brokerage account, checking account, and IRA with a total value at the time of my father’s death of $2 million.  Do we owe Nebraska Inheritance Tax?

A: You will need to file a Nebraska Inheritance Tax determination in Douglas County, Nebraska.  However, the Inheritance Tax Order should reflect that no Inheritance Tax is due.  Your mother is entitled to certain exemptions, allowances, etc., as well as a 0% Inheritance Tax rate.  When your mother passes away, assuming the same fact pattern, you will likely owe Inheritance Tax.

Q: My grandmother passed away and all her assets were held in trust.  My mother is the primary beneficiary of the Trust and my brother and I (grandchildren of my grandmother) are beneficiaries if or when my mother dies.  My grandmother lived in Gering, Nebraska.  The value of her trust assets at the time she passed away was $700,000.  Do we owe Inheritance Tax?

A: Yes.  An actuarial calculation of your mother’s life expectancy at the time of your grandmother’s date of death is determine your mother’s life interest in the Trust.  For illustration purposes, let us assume that your mother’s life interest is calculated as 30%.  That means the remainder interest (70%) is split between your brother and you (35%) each.

Your mother is provided a $12,000 Exempt Property allowance.  Your mother, brother, and you  are each afforded a $100,000 exemption.  The Inheritance Tax is approximately $3,880 and is further reduced by any qualifying deductions.

Q: My aunt passed away.  She lived in New York, New York.  She had $10 million of assets.  Of the assets, she owned a farm in Kearney (Buffalo County), Nebraska.  The farm was worth $1 million.  My aunt did not have any children and her Will provides everything to me (her niece).  Do I owe Nebraska Inheritance Tax?

A: Only the Nebraska farm is subject to Nebraska Inheritance Tax.  You are entitled to a $40,000 exemption.  Your current Inheritance Tax rate is 11%.  Your Inheritance Tax is approximately $105,600 and is further reduced by any qualifying deductions.  The Nebraska Inheritance Tax is payable to Buffalo County, Nebraska.  Any taxes relating to the State of New York are beyond the scope of this presentation.

Nebraska Inheritance Tax – in Closing

Please know that the transfer of assets from a decedent may involve certain federal estate tax, the decedent’s final income tax return, and certain estate fiduciary income tax return issues.

It is important to know that some of the details presented above are subject to any law changes from time-to-time.

Are you looking for assistance with your family’s Inheritance Tax needs? Or, for a recommendation of a probate attorney that specializes in these matters? We can help.

Published On: February 27th, 2024 / Categories: Blog /