## Facts

- John O’Connor died owning real property located in Adams County, Nebraska.   
- O’Connor died intestate and without any heirs capable of taking his property under Nebraska’s laws of descent and distribution.   
- Because there were no heirs, the estate’s real property escheated to the State of Nebraska by operation of law under an 1875 Nebraska statute providing that upon failure of heirs, title vests at once in the state.   
- Adams County contended that the State of Nebraska, as taker of the property, was a “beneficiary” under the inheritance‑tax statutes and therefore liable for an inheritance tax on the escheated property.   
- The county probate court (and then the district court of Adams County) determined that the estate had escheated to the state for want of heirs and assessed inheritance/estate taxes against the State in favor of Adams County. The State appealed to the Nebraska Supreme Court.   

## Issues

1. When the State acquires title to real property by escheat for failure of heirs, does the State take as a beneficiary or successor under the inheritance laws such that the escheated estate is subject to inheritance tax?  
2. More specifically, is property that reverts to the State by escheat treated as a taxable “succession” under Nebraska’s inheritance‑tax statutes?

## Decision

- The Nebraska Supreme Court reversed the district court’s judgment and dismissed the action.   
- The court held that when the State takes title to real property by escheat for want of heirs, it does not take as a successor or beneficiary under the laws of inheritance or descent.   
- Instead, the State takes as the original and ultimate proprietor of the land, in the nature of a reversioner, upon failure of any person legally entitled to hold the property.   
- Because Nebraska’s inheritance‑tax statutes apply to transfers of property by succession (inheritance, will, or transfers in contemplation of death), and not to reversions by escheat, the escheated estate is not subject to inheritance tax.   

## Legal Principles

- “Escheat” is the lapsing or reverting of real property to the state, as original and ultimate proprietor, when there is a failure of persons legally entitled to hold the property (failure of heirs). 1search6  
- Ordinary “ownership” of real estate is conceptually a tenancy whose continuance depends on legally recognized tenure, transfer, or succession in use and occupancy; when that tenancy ends because there is no recognized successor, the land reverts to the state.   
- Upon failure of heirs, title to real estate vests immediately in the state; no inquest or special proceeding is required for the vesting to occur, under Nebraska’s escheat statute.   
- When the state takes property by escheat, it does not take “under the laws of descent and distribution” but as a reversioner; thus, that acquisition is not a taxable “succession” under inheritance‑tax statutes that are premised on transfers by inheritance, will, or similar inter vivos transfers related to death.   
- Inheritance tax is assessed upon succession to property interests, not upon reversion of title to the state for want of heirs; therefore, escheated property is exempt from inheritance tax absent explicit statutory language to the contrary.   

## Conclusion

In In re O’Connor’s Estate, the Nebraska Supreme Court held that when real property escheats to the state because a decedent dies without heirs, the state acquires the property as ultimate reversioner rather than as heir or beneficiary. Because Nebraska’s inheritance‑tax scheme taxes only successions and not reversions by escheat, the state owes no inheritance tax on escheated property, and Adams County could not compel the state to pay such a tax.


In re O'Connor's Estate, 126 Neb. 182, 252 N.W. 826 (Neb. 1934)