My mother in law didn't file income taxes after her husband died because she lived on a small retirement income. She died in Nov. 2009. Must we file taxes on her estate, although it has not yet been settled? The total value is under $200,000.

“ Must we file taxes on her estate, although it has not yet been settled? The total value is under $200,000”--->I guess you, as an heir, don’t have to pay estate tax.In general, your MIL’s estate will have to pay estate taxes if the net value (gross assets minus debts) when she dies is more than the exemption amount set by Congress,$1.5 million for 2009. If your MIL’s estate falls under the government exemption her trustee/executor does not have to file an estate tax return ,Form 706, and pay the required tax within 9 months of her death. An estate tax is based on the overall value of the deceased person's estate,in this case your MIL, not on who inherits the estate. Also whether or not you will pay inheritance tax for the property inherited depends on the state you live in; however, I guess you are not even subject to state inheritance tax due to low amount, $200,000. Inheritances are not considered income. Therefore, there will be no tax on the inhertied amount.So, you will have to pay income tax on any earnings you receive on those inheritances. You may contact your state dept. of revenue.