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Sorry to hear of your wife's loss.
Was the decedent a citizen or resident of the United States?
Is your wife a citizen or resident of the United States?
Estate tax rules are different for nonresident aliens than for citizens or residents of the United States; so the additional information is needed.
my father in law had a green card but he never worked or lived in US - all his assets were/are in paksitan. He also never filed any income tax return here in US. he only visted US twice in 5 years both time for less than a month each.
my wife is a perminent resident in US and we have been filing joint tax returns
As a resident alien (green card holder) his estate will follow the same rules as a citizen of the United States.
You may also wish to explore the U.S. Citizens and Resident Aliens Abroad - Filing Requirements for income taxes since resident aliens living or traveling outside the United States, generally are required to file income tax returns, estate tax returns, and gift tax returns and to pay estimated tax in the same way as those residing in the United States.
As you may already know, for deaths in 2010 there is not any federal estate tax. The estate of the decedent (and not the beneficiary, your wife in this case ) is liable for filing and paying the estate tax.
Your wife is not required to report the inheritance on her individual tax return, except for any amount earned from the inherited property after the date of death.
In regard to the estate filing you can see more information at New Filing Requirement for Executors
Virginia does not collect inheritance taxes and does not have an estate tax.
Please ask if you need clarification.