Your four-year-old daughter is indeed a most creative and imaginative child! Most kids' imaginary friends are not dead. Your daughter's imaginary friend died in a horrible manner, and it was her mother who "caused" the fire and Katie's death. I assume that your daughter represents your own Christian religious beliefs of life after death with Jesus, when she says that Katie is now with Jesus in heaven. At the age of four, she would not state that being in heaven is a state of everlasting bliss, so she mentions that her little friend misses her earthbound teddy bear. Your daughter had to have heard the complicated words that she used to describe her imaginary friend -- she did not "imagine" them. If she used this abnormally sophisticated vocabulary in a contextually appropriate manner, then she has been paying close attention to some older people's conversations, comprehending some of the language used and then applying it to her special, imaginary world -- quite a cognitive feat for a four-year-old.

It might help you to engage your daughter in some open-ended discussions of her imaginary friend, in an attempt to get some clues as to whether your daughter was attempting to work through some inner questions, needs, fears, or concerns of her own. If her relationship with Katie becomes more and more intense and frequent, to the exclusion of her socializing with peers and family members and playing with her toys, then I would be somewhat concerned. If her fantasy tales of Katie take on more morbid, frightening or sad overtones, that would also be cause for concern.

You might feel more relieved if you sought a personal consultation with a talented child therapist -- one who sees many children your daughter's age -- and discussed with her in detail the imaginary life of your daughter and her current life apart from her fantasy world. Imaginary friends are usually a healthy extension of a child's cognitive, emotional, and social development. Sometimes they are the child's unconscious, primal, alter ego. Talking with a skilled professional about your daughter and her imaginary friend will help place this particular behavior in context and give you a chance to brainstorm what may be underlying some of the stories in your daughter's fantasy world.