Will My Loved Ones Have to Pay Taxes When I Pass Away?

Maybe.

To begin, property or inheritance left to your spouse or a charity will not be subject to federal estate taxes. California has no inheritance tax.

For property passing to others, it depends on what year you pass away. If you pass away in...

• In 2006, 2007 and 2008, the portion of your estate that is left to your children or other loved ones will be taxed if your estate was greater than $2 million.
• In 2009, your estate can pass to loved ones tax free if it less than $3.5 million.
  
• In 2010, the estate tax will disappear altogether.  Yes, for one whole stinkin' year.
• In 2011, the estate tax exemption will revert back to $1 million.  So if you pass away in 2011 with more than $1 million in assets, your estate will be taxed on those dollars exceeding $1 million.

Chances are that Congress will pass an extension or change the law somehow.

If you are confused or want a more detailed explanation, please consult with an attorney or tax accountant.