03/06/2007

Estate Planning Focus: Changes to the Nebraska Death Taxes

REPEAL OF THE NEBRASKA ESTATE AND GST TAX

In order to keep Nebraska’s citizens and businesses in the state, the Nebraska Legislature retroactively repealed the Nebraska estate tax and generation skipping tax for deaths occurring on or after January 1, 2007.

CHANGES TO THE NEBRASKA INHERITANCE TAX

Nebraska imposes an inheritance tax which is calculated on the amount inherited by a beneficiary.  The inheritance tax is paid to the counties.  For decedents dying on or after January 1, 2008, LB 502 imposed the following changes to the Nebraska inheritance tax:

• Property passing to immediate family members and lineal descendants is still subject to a 1% tax, although the exemption amount has increased from $10,000 to $40,000 per person.
• Property passing to aunts, uncles, nieces, nephews, and their descendents and spouses is now taxed at a rate of 13% on amounts over $15,000.
• Property passing to all other individuals is now taxed at a flat 18% rate on amounts over $10,000.
• An additional penalty provision has been added.  The amended law adds a 5% per month penalty for the failure to file a proceeding for the determination of the inheritance tax within 12 months after a decedent’s death.  The penalty is capped at 25% of the unpaid tax.
• Apportionment between counties has been clarified.  If a decedent owns real or tangible personal property in more than one county, the value of property not subject to tax will be taken into account in apportioning inheritance tax among the various counties.