<p>If the husband dies first, and he gives all his property to his wife,  then under a special rule called the marital deduction, there will be  no estate tax upon his death. This is true even if the estate is above  $3,500,000 (in 2009). For example if a husband and wife jointly own more  than $7,000,000, and the husband dies. Husband is allowed $3,500,000  exemption (in 2009) for his one half of community property. Under the  marital deduction, if the husband's property over $3,500,000 exemption  (in 2009) passes to the surviving wife, then there is no estate tax.</p>
<p>However,  when the surviving wife thereafter dies, there will be death taxes. If  the wife's estate is over $3,500,000 (in 2009), death taxes must be  paid. If the wife's estate is $4,000,000 the death taxes will be about  $225,000. Nevertheless, death taxes can be avoided or reduced in this  case with proper estate planning. (see discussion on Estate Planning  Trust)</p>
<p>The same marital deduction rules apply if the wife dies first.</p>