IN Shaddick v. Hessler, 316 Neb. 600 (May 10, 2024), the Nebraska Supreme Court held that express tax-splitting provisions in a decedent's revocable trust violated the state law rule that all beneficiaries share proportionately the burden of the inheritance tax.

Michael Hessler created a revocable trust as part of his initial estate plan. Later, he changed his faith to leave his home completely and without faith in his girlfriend, Lori J. Miller. The remainder of his estate passed equally to his children. Michael's children argued that Lori should be responsible for a pro rata share of the estate tax. However, Lori noted a provision in the trust that specifically assigned the estate tax burden to the remainder beneficiaries. The court agreed with Lori and affirmed the lower court's decision.

The default provisions of the Nebraska Revised Statutes state that the estate tax must be divided proportionately by the beneficiaries, unless otherwise directed. Michael's trust stated, in relevant part, that “The Successor Trustee shall pay from this trust all inheritance and estate taxes due to the Settlor's death, whether or not such taxes relate to trust property.” The court found that such a direction, along with the direct, specific distribution of the decedent's home to Lori, meant that the taxes would be paid by the trust “off the top” and that the home was removed from consideration. The court relied on its 2015 decision in On Shell's property, in which similar language shifted the tax burden to the decedent's estate.