Inheritance Tax Basics

In the case of inheritance tax, no truer words have been spoken than those of Benjamin Franklin: “in life, taxes and death are the only certainty.” Nebraska is one of six states that collects inheritance tax. (In case you were wondering, Iowa does, too). Nebraska’s inheritance tax statutes assess a tax against those who receive assets from a decedent at the decedent’s death. The tax applies if the decedent was a resident of the state at the time of death. All personal property and real estate (located in Nebraska) owned by the decedent at the time of death is subject to tax, excepting life insurance. Additionally, spouses and charities do not pay inheritance tax.

The rate of tax and applicable exemption amounts depend on the relationship of the beneficiary to the decedent. Here are some examples:

•          A child of a decedent will receive a $40,000 exemption; the value of any assets received above $40,000 will be taxed at 1%.

•          A niece or nephew of a decedent will receive a $15,000 exemption; the value of any assets received above $15,000 will be taxed at 13%.

•          A nonfamilial beneficiary will pay 18% tax above a $10,000 exemption.

On the inheritance tax worksheet, the filing party can also take deductions for things like attorney fees, accountant fees, other administrative expenses, and paid claims and bills of the decedent. There are also other applicable deductions that come into play for children, such as an exempt property deduction.

Determination of inheritance tax is a court proceeding in Nebraska. On a base level, a petition, inventory and inheritance tax worksheet must be filed in court in the county where the decedent lived at the time of death. The county attorney reviews these documents at the time of submission. If approved, the pleadings are then submitted to the court for approval. Once the order of tax is entered by the judge, the inheritance tax is paid to the county treasurer.

An inheritance tax must be filed and paid within one year from the date of the decedent’s death to avoid penalties and interest. Additionally, a lien is placed on any real estate owned by the decedent until the tax is paid.

A qualified attorney can answer your questions regarding inheritance tax, be it in your own estate or one where you are a beneficiary.

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