Nebraska Inheritance Tax

As you may know, Nebraska levies an inheritance tax upon beneficiaries of a decedent who owned Nebraska property.  As background, the Nebraska inheritance tax is a state law but the tax itself is paid to the county in which the property is located.  The inheritance tax is applicable to real and personal property.  That means tax is due on items such as cash, vehicles, and real estate.  The inheritance tax is also due on life insurance proceeds if the proceeds are paid to the estate.

How much will you owe in inheritance tax?  It depends upon your relationship with the decedent.

  • If you are a surviving spouse or charity, no inheritance tax is due.
  • If you are an immediate relative, defined as parents, grandparents, siblings, children (including children legally adopted), any other lineal descendent such as a grandchild (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, a 1% inheritance tax is due and each person receives a $40,000 exemption from the inheritance tax.
  • If you are a remote relative, such as an aunt, uncle, niece or nephew related by blood or legal adoption, or other lineal descendants of the same, or the spouse or surviving spouse of any of such persons, a 13% inheritance tax is due and each person receives a $15,000 exemption from the inheritance tax.
  • If you do not fall into the above categories, a 18% inheritance tax is due and each person receives a $10,000 exemption from the inheritance tax.

The inheritance tax worksheet is due 12 months after the decedent’s death and is submitted to the county court where the decedent resided or where the property is located.  And the tax is due regardless of whether you or the decedent was a Nebraska resident.   The question is whether the property was located in the Nebraska.  If the property is in Nebraska, the tax is due.

Don’t let the inheritance tax take you and/or your beneficiaries by surprise.  We’re happy to provide more information, especially for Nebraska’s farmers and ranchers; you just have to contact us!

Some basics about the federal estate and gift tax

As discussed previously, the 2014 unified credit for federal estate and gift tax has been raised to $5.34 million per person.  But what does that all mean?

The unified credit is the term given to the total amount a person may exclude from federal estate and gift tax.  In other words, a person may transfer assets during their lifetime (i.e. gifts) or after (i.e. estates).  The amount a person may transfer via only gifts, only estates, or a combination of the two is the unified credit.  It is only when the credit is exceeded that federal estate and gift tax is owed.  In other words, if the combination of your gifts and estate totals $6.34 million, federal estate and gift tax will be owed on $1 million ($6.34 million minus $5.34 million 2014 unified credit).

Portability remains a possibility with spouses.  Remember that portability requires the estate of the deceased spouse to file an estate tax return, even if no tax is owed.  The estate tax return is due nine months after the death, with a six month extension permitted.

Also remember that the annual gift tax exclusion is different than the unified credit.  You can gift up to $14,000 per person without encroaching upon the unified credit.

A good article that goes over the above and a few other details is here.  If you are a Nebraska or South Dakota farmer or rancher considering business transition, feel free to contact us with any questions you may have about the federal estate and gift tax.