Nebraska Is One of the Few States That Still Has an Inheritance Tax. What Omaha Families Should Know Before It Comes Due

Nebraska does not have an estate tax. That fact leads a lot of people to assume nothing is owed when a parent dies, which is where the surprise usually starts.

Nebraska is one of a small group of states that still collects an inheritance tax. Nebraska's version is unusual even among those: the money goes to counties rather than the state, and the bill belongs to the person receiving the property, not to the estate as a whole.

Who Pays, and How Much

The rate turns on the beneficiary's relationship to the person who died, and each beneficiary gets a separate exemption. For deaths on or after January 1, 2023:

• Parents, grandparents, siblings, children, and other lineal descendants pay 1% on the value above $100,000
• Aunts, uncles, nieces, nephews, and their descendants pay 11% above $40,000
• Everyone else pays 15% above $25,000

A surviving spouse owes nothing, regardless of amount. Anyone in these groups under age twenty-two is also exempt, and qualifying charitable and religious organizations generally are too. Funeral costs, administration expenses, and debts of the person who died are deducted before the tax is figured, which is one reason estate planning and recordkeeping matter more than families expect.

A Trust Does Not Make It Disappear

This is the point that catches people. Nebraska taxes transfers that take effect at death, whatever route the property travels. A revocable living trust keeps assets out of probate, but it does not remove them from the inheritance tax. Neither do joint accounts, payable-on-death designations, or jointly titled real estate.

When there is no probate case, a separate county court proceeding is usually opened for the sole purpose of determining the tax. Families who set up a trust specifically to stay out of court are often startled to learn a filing is still required, which is why trust and estate administration rarely ends at the funeral.

The County Collects It, and the Clock Runs Twelve Months

Payment goes to the treasurer of the proper county. For most Omaha families that means Douglas County, though land in another county shifts part of the tax there. The tax is a lien on Nebraska real estate until paid or released, which can stall a sale or refinance.

The deadline is twelve months from the date of death. Nebraska law adds a penalty of 5% per month, up to 25%, when no proceeding to determine the tax has been filed in that window, and statutory interest runs on unpaid amounts. Waiting for an estate to finish before dealing with this is a common and expensive habit.

Where the Higher Rates Land

The 15% bracket is broader than it sounds. A longtime unmarried partner, a close friend, a neighbor who provided care, or a stepchild who was never legally adopted can all fall outside the family classes. On a $200,000 bequest, the difference between the 1% class and the 15% class is substantial.

Nebraska law does recognize a person the decedent treated as a child for at least ten years, so some stepchildren qualify for the lower rate. Whether a relationship fits is something an attorney can evaluate against the facts rather than assume.

How This Fits With Long-Term Care Planning

Families often raise inheritance tax while working through Medicaid and long-term care planning, and the two sets of rules are separate. Medicaid has its own look-back period for transfers. Nebraska's inheritance tax has its own rule treating certain gifts made within three years of death as made in contemplation of death.

A gift that looks sensible under one rule can create a problem under the other. The elder law attorneys at Legacy Design Strategies work through both together, because the right sequence depends on the client's age, health, and how assets are titled.

Iowa and North Dakota Are Different

Iowa repealed its inheritance tax for deaths occurring on or after January 1, 2025. North Dakota has none. A Nebraska resident who also owns Iowa property may find each parcel treated under the law of the state where it sits.

Will Nebraska Repeal It?

Repeal has been debated in recent legislative sessions, with proposals to raise exemptions and lower rates. Counties rely on the revenue and have pushed back. Nothing has changed as of this writing, so plans should be built on current law and revisited if it moves.

Key Takeaways

• Nebraska has no estate tax but still collects a county inheritance tax from beneficiaries.
• Rates run 1%, 11%, or 15% depending on the relationship, each with its own exemption.
• Spouses, beneficiaries under twenty-two, and qualifying charities are exempt.
• Trusts, joint accounts, and beneficiary designations avoid probate but not this tax.
• The tax is due twelve months after death, with penalties and interest for late filing.
• Unmarried partners, friends, and caregivers can land in the 15% class.

Planning Around a Tax That Is Still on the Books

Nothing here changes who you want to leave things to. It changes what reaches them. Knowing which class each beneficiary falls into, and calendaring the twelve-month deadline early, puts a family in a better position than discovering both after the fact.

Legacy Design Strategies works with families in Omaha and across Nebraska, Iowa, and North Dakota. The firm's attorneys can review how your assets are titled, explain how the inheritance tax in Nebraska may affect each beneficiary, and coordinate that with long-term care and estate planning. Request a consultation to learn more.

References: Nebraska Legislature, Revisor of Statutes, Nebraska Revised Statutes, Chapter 77, Article 20, Inheritance Tax (sections 77-2001 to 77-2040) and Nebraska Department of Revenue, Inheritance Tax