My dad recently passed away. My sister and I will each receive about $80k each from a life insurance policy and savings accounts. Do we have to pay taxes on this?

Proceeds of a life insurance policy are non-taxable. As far as the bank account - "Inheritance taxes are separate from estate taxes imposed by the federal government and many states.

The Internal Revenue Service collects the estate tax on all U.S. citizens and residents. The tax is levied on the deceased's estate as a whole, filed on a single estate tax return and paid out of the estate's funds. The U.S. government imposes no inheritance tax.


States, however, may impose an inheritance tax on beneficiaries who receive property from the deceased. These taxes are assessed by states in place of or in addition to state and federal estate taxes. The tax is calculated separately for each beneficiary, and each beneficiary is responsible for paying his or her own inheritance taxes."

Taxes: Death and taxes - Inheritance taxes (http://www.bankrate.com/brm/itax/Edit/basics/Final_filing/basic_3a.asp)

Proceeds from insurance pay outs are not taxed. Now, if you go and invest this money, the profits are taxed.