My sister passed away in Chicago Illinois. Her life insurance policy was $150,000. I live in Michigan so is there a tax on that money?

No - there are no taxes that you need to worry about. Life insurance proceesds are not taxable as income to the beneficiary, and neither MI nor IL has an inheritance tax. The executor of her estate - not you - would take care of any estate taxes that may be due either to the feds or Michigan.

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