Estate Law Questions? Ask an Estate Lawyer.
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The simplest way to handle this is for the brother-in-law to simply get his share of the money and hand it over to your wife. It requires no forms, nothing official, etc. The money received isn't taxed, so there's nothing to worry about there. But if the brother-in-law wants it to be "official," then he can draft/sign/notarize a letter which states that he disclaims any interest in the money. Then (assuming there are no other heirs), your wife would inherit all of the money.
Does that answer your question? Please let me know if you need clarification, as I am happy to continue helping you until you are satisfied.
No tax issues based on what you wrote. You already mentioned that it's far under the legal amount to owe estate taxes. The gift tax has the same threshold. So I don't see a tax issue here.
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