NOTE: State laws change frequently and the following information may not reflect recent changes in the laws. For current tax or legal advice, please consult with an accountant or an attorney since the information contained in this article is not tax or legal advice and is not a substitute for tax or legal advice.
Although Nebraska repealed its separate state estate tax in 2007, Nebraska is among only seven states that assess a separate inheritance tax on certain property owned by a Nebraska resident and real estate and tangible personal property located in Nebraska that is owned by a non-resident.
Estate Taxes vs. Inheritance Taxes - What's the Difference?
While it may just seem to be semantics, there is a real difference between an estate tax and an inheritance tax:
- An estate tax is charged against the entire estate regardless of who the beneficiaries of the estate may be.
- An inheritance tax is only charged against the shares of certain beneficiaries of an estate.
Which Beneficiaries Are Subject to the Nebraska Inheritance Tax?
Each beneficiary of a Nebraska estate receives an exemption from the inheritance tax based on the beneficiary's degree of relationship to the decedent. Here are the exemptions from the inheritance tax that are currently available under Nebraska law:
- Surviving spouses and charities are entirely exempt from the inheritance tax. This is consistent with the laws of the other six states that collect an inheritance, as all six also exempt property passing to a surviving spouse.
- Immediate relatives include parents, grandparents, siblings, children (including those legally adopted), any other lineal descendant (including those legally adopted), any person to whom the decedent for not less than ten years prior to death stood in the acknowledged relation of a parent, or the spouse or surviving spouse of any such persons. Each immediate relative is entitled to receive an exemption of $40,000. Of the other six states that collect an inheritance tax, four exempt children and grandchildren from the tax.
- Remote relatives include uncles, aunts, or nieces or nephews related to the decedent by blood or legal adoption, or other lineal descendants of the same, or the spouse or surviving spouse of any of such persons. Each remote relative is entitled to receive an exemption of $15,000.
- Other transferees include anyone not listed above. Each type of other transferee is entitled to receive an exemption of $10,000.
Is Life Insurance Included in a Nebraska Estate?
Life insurance that is payable to the decedent's estate is included in the value of the estate, while life insurance that is payable to a living beneficiary or a revocable living trust is not.
What Expenses Can Be Deducted From the Value of a Nebraska Estate?
Certain expenses can be deducted from the value of a Nebraska estate, including:
- Funeral expenses, including costs for internment and a gravesite marker
- All expenses of administration, including attorney's fees, court costs, expenses concerning property not subject to probate, expenses related to taking possession or control of estate assets and the management, protection, and preservation of estate assets, but not expenses related to the day-to-day operation and continuation of business interests which have not accrued as a result of the death of the decedent
- Expenses of the last illness which were incurred within six months of death
- Other debts of the decedent which have been paid
- Any federal estate tax paid, payable, or expected to become payable, after deduction of all applicable credits, which is attributable to property subject to Nebraska inheritance taxation
What Are the Nebraska Inheritance Tax Rates?
The Nebraska inheritance tax rates are as follows:
- Immediate relatives are subject to an inheritance tax of 1%.
- Remote relatives are subject to an inheritance tax of 13%.
- Other transferees are subject to an inheritance tax of 18%.
What Nebraska Inheritance Tax Forms Must Be Filed and When Are They Due?
An inheritance tax worksheet called Probate Form 500 must be filed with the county court of the county in which the decedent resided or in which the decedent's real or personal property is located. The form must be filed and inheritance taxes must be paid within twelve months after the decedent's date of the death.
Where Can You Find Additional Information About Nebraska Inheritance Taxes?
For more information about Nebraska inheritance taxes, refer to Nebraska Revised Statutes §77-2001 et seq.