My mother in law is the benficiary for my late husband's life insurance policy?

Yes, if she just gifts it to you she'll pay a gift tax.

She can gift $14,000 per year without paying tax. If she has a spouse each of them can gift you $14,000 per year, even if he wasn't a beneficiary. Also, if you have children they can gift their grandchildren and avoid some of the taxes.

She'll want to speak with a financial planner for more information and don't even try to do anything on websites like this.

Life Insurance proceeds are not part of the estate and are not subject to taxes. The proceeds are paid directly to the named beneficiary. The named beneficiary does not owe taxes on the money and can do what ever they want to with it. If the beneficiary gifts the money to another person, then the gift is subject to taxes. Your mother in law should consult her tax preparer for advise before doing anything.

Tell her that instead of getting the money in a check just tell the insurance company to put the money into a checking account for your mother in law. All insurance companies offer it. You get interest on the money. You get a debit card so you can withdraw money when you want to and make purchases with it. You can not deposit money. You can only withdraw the money until it is gone.

Your mother in law can give you the debit card to use.

You might want to repost your question under the "tax" category. Check with the IRS if you are going to take the one lump sum check. Your mother may be able to roll the money into something for you like a home. Check with the IRS. Or, take the checking account.

It's unlikely that she would pay gift tax.

In 2013, if the gift is over $14000 she has to file gift tax documentation with the IRS. That does not mean she owed gift tax. She has to gift over $5million in her lifetime before she actually owes gift tax. Unless she has a large estate... would she ever be able to do this?

Sorry for your loss.

She'd pay gift tax, but if he didn't name a contingent she MAY be able to disclaim it and you get it. Naturally, you'd want to make sure that was the case before she did it.

Just be sure to talk to someone. Depending on her net worth, she could use some of her lifetime credit to offset it as well.

If she gives it all to you at the same time, then she will pay gift tax on it.

You will not pay gift tax on it.

If she gives it to you slowly enough, for example, $10,000 a year for 15 years, then no one will pay gift tax on it.

It's not uncommon, for someone to list their parent as beneficiary.

Yes, if she gives you $150,000, SHE will be hit with HEAVY gift taxes.