CDs affect 2001 Income Tax

My grandfather died last July and left certificates of deposit payable on death to me and my sister. Is there some way this has to be reported to government or taxes has to be paid on this. Does this affect my income tax and if so how and what forms need to be completed? I've been told this does not affect my income taxes and there is no inheritance tax in state of KY. I just want to be sure I am doing things correctly. Thanks for any help.

There is no income tax on inherited property, so you do not have to report this on your income tax, except that the interest you earned on the CDs during the year would be taxable.

If there was federal estate tax due, that would be a liability of the estate itself. If the estate was valued at less than $675,000, there would be no federal estate tax due, and no estate tax return would be required. If the estate was valued at more than that, a federal estate tax return is required.