In response to your posting be advised of the following: My late parents were residents of New Jersey. Their Estates received payouts from the US Victim's of State Sponsored Terrorism Fund due to the loss of a family member on 9/11. The New Jersey Division of Taxation taxed the funds received (Estate Tax) because they claimed there was nothing specifically mentioned about this fund in IRS Publication 3920. So be advised that payouts from this fund may be taxable in certain situations.
