Have Tax Questions? Ask a Tax Expert for Answers ASAP
Sorry to hear about your loss.
There are multiple questions as to what is taxable; Federal estate tax, Illinois estate tax, probate fees, Federal income tax (on either the estate or on her or you), and Illinois income tax.
Insurance is counted for estate tax, but not for income tax.
403b are counted for estate tax, but only for income tax when withdrawn.
The present value of the pension may be counted for estate tax; pensions are partially taxable for income tax if she made contributions, and taxed in full if she did not.
For estate taxes, the Federal exemption corresponds to $5 million, the Illinois exemption has recently been increased to $3.5 million, and there is an unlimited marital exemption (in other words, what goes to you isn't counted against the exemption limits.)
I made a slight mistake; the Federal exemption was increased to $5.12 million for an inflation adjustment.
Any payment made to her after her death is subject to both estate tax and income tax to the estate, or to the beneficiary if transferred. (This last is a bit simplistic, but it's approximately correct. The precise phrasing is that income to the estate is allocated to the beneficiaries if at least as much is distributed as the amount of otherwise taxable income.)
If you need further help, please ask. I'm not online continuously, but I'll reply as soon as I see the question.