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Understanding the Nebraska Inheritance Tax

Nebraska stands among the few states that still enforce an Inheritance Tax.  This tax is applicable when property is transferred from a deceased individual (the “Decedent”) to the recipient or beneficiary.  If the Decedent was domiciled in Nebraska, the tax applies to all their property.  Additionally, “tangible property” located in Nebraska, such as real estate, is subject to the Inheritance Tax, regardless of the Decedent’s domicile.  Thus, even if a non-Nebraska resident owns real estate in Nebraska and it passes to a non-Nebraska beneficiary, it remains subject to the Nebraska Inheritance Tax.

The exemption amount and tax rate differ based on the beneficiary’s relationship to the Decedent. Also, the exemption amount and/or tax rate differ if the Decedent died before 2023.  Property passing to a surviving spouse or charity is exempt and not taxed. For “immediate” relatives (children, parents, grandparents, siblings, or their spouses), there is a $100,000 tax exemption per relative, and a 1% tax applies after the exemption. For instance, if the estate is distributed to three children, each would receive a $100,000 exemption, and then a 1% Inheritance Tax would apply.

For distributions to more “remote” relatives (aunts, uncles, nieces, nephews, and their spouses), a $40,000 tax exemption is applicable per relative, and an 11% tax follows. “Non-relatives” each receive a $25,000 tax exemption and face a 15% tax.

Certain expenses can be deducted from the taxable estate before calculating the Inheritance Tax, including the Decedent’s debts, funeral expenses, attorney and accountant fees, Probate costs, and property closing costs. To avoid penalties, it is crucial to file the return promptly. Failure to file within one year of death may result in a penalty of 5% per month (up to a total penalty of 25% of the unpaid tax). Moreover, the tax accrues at a rate of 14% if unpaid within one year of death.

Navigating the complexities of the Nebraska Inheritance Tax requires knowledgeable guidance.  As experienced Estate Planning attorneys in Omaha, Nebraska, we can help you understand the tax implications and efficiently handle the process. Contact us to ensure compliance: 402.718.8888