NTF Issue Paper: Legwatch26.doc   1-03.
NEBRASKA TAXPAYERS FOR FREEDOM ISSUE PAPER:
NEBRASKA ESTATE TAXES.

 BACKGROUND.  Nebraska has continued an estate tax that absorbs the maximum credit from the federal estate tax, thereby nullifying federal estate tax relief for Nebraskans.  Our state has a layered inheritance tax system.  The amount of tax imposed depends on who gets your “stuff” after you die.  There are 3 classes of beneficiaries.  NE also imposes a generation-skipping transfer tax equal to the federal credit. 

 BENEFICIARY CLASSES.  In Class I, transfers to a surviving spouse are totally exempt.  This class includes parents, grandparents, siblings, children, grandkids, or anyone to whom the decedent stood in acknowledged relation for at least 10 years before death, or the spouse or surviving spouse of such persons.  After a $10,000 per beneficiary exemption, transfers in this case become taxed according to the table below. Class II beneficiaries include a decedent uncle, aunt, niece, or nephew related by blood or legal adoption, or any legal descendent of same.  Each beneficiary receives a $2,000 exemption, after which a transfer pays tax at the rates in the table below.  Class III includes transfers that do not involve members of the first 2 classes.  Transfers become taxed at the rates in the table below, after a $500 per beneficiary exemption.  Transfers involving charitable and educational organizations or a bequest to a political subdivision or government agency or department are tax-free. 

 

NEBRASKA INHERITANCE TAX RATES

 

 

Value of share in

Class I tax

Class I

Class II

Class II

Class III

Class III

excess of exemption

on Col. 1

rate on

excess

tax on Col. 1

rate on

excess

tax on Col.1

rate on

excess

 

 

 

 

 

 

 

1

2

3

4

5

6

7

$0

$500

$0

               0

$0

               0

$0

$500

$2,000

$0

               0

$0

               0

$30

$2,000

$5,000

$0

               0

$0

6%

$120

$5,000

$10,000

$0

               0

$180

6%

$300

$10,000

$20,000

$0

1%

$480

6%

$750

$20,000

$50,000

$100

1%

$1,080

6%

$1,950

$50,000

$60,000

$400

1%

$2,880

6%

$6,450

$60,000

and up

$500

1%

$3,480

6%

18%

 

 

 

 

 

 

 

Source: CCH Financial Planning Toolkit 2003.

 

 

 

 DEDUCTIONS.  A decedent estate may deduct the following from NE estate tax liability:

  1. decedent debts.
  2. medical expenses of final illness.
  3. funeral expenses.
  4. administrative expenses, including commissions and fees of executor and administrators.
  5. reasonable attorney fees.
  6.  federal estate taxes attributable to property subject to state inheritance income and property taxes accrued up to the time of death.
  7. mortgages.

TIMING.  Within 3 months of the executor or administrator appointment, one must file an inventory of the estate with the county court having jurisdiction over administration of the estate.  A NE estate tax return must become filed within 12 months of decedent death.  Estates must pay taxes due during this time frame to the county treasurer.   

Research and documentation for this issue paper done by Doug Kagan and Lee Mimms.  This material copyrighted by Nebraska Taxpayers for Freedom, with express prior permission for its use by Taxwatchers, Inc., Citizens for Local Control, NE Libertarians, and other groups in the Tax Freedom Network.   1-03   C