Nebraska To Reduce Inheritance Tax Rates, Increase Inheritance Tax Exemptions In 2023
Nebraska is currently one of six states that imposes an inheritance tax when a resident of the state passes away. The inheritance tax does not currently apply to transfers to a surviving spouse. However, for transfers to other immediate family members (e.g., children, grandchildren, siblings, parents, etc.), the inheritance tax rate is 1% on the fair market value of the property that passes to each applicable beneficiary over an exemption amount of $40,000 per beneficiary. If any assets pass to more remote relatives (such as aunts, uncles, nieces, and nephews), the inheritance tax rate is 13% on such transfers over a $15,000 exemption amount per beneficiary. For transfers to unrelated persons, the inheritance tax rate is 18% on transfers over a $10,000 exemption amount.
However, on February 17, 2022, Nebraska Governor Pete Ricketts signed a bill into law effectively reducing the inheritance tax for deaths occurring on or after January 1, 2023. Spouses will continue to be exempt from paying Nebraska inheritance taxes. The tax rate on transfers to immediate relatives will remain at 1%, but the exemption amount will be increased to $100,000 per beneficiary. The tax rate on transfers to remote relatives will be reduced to 11% (from 13%) and the exemption amount will be increased to $40,000 per beneficiary. The tax rate on transfers to unrelated individuals will be reduced to 15% (from 18%) and the exemption amount will be increased to $25,000. In addition, the inheritance tax will not apply to transfers to individuals aged twenty-one (21) years or younger.
If you would like to make any changes to your estate plan based on these updates, please contact any member of the McGrath North Tax & Estate Planning Practice Group.
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