My aunt has no children. She will be leaving all of her assets to her sisters. Her estate would be worth less than the current $3.5m federal exemption. What taxes will the sisters have to pay and will there be any estate taxes.

Dave

None and no.

That being said, there are special rules on how to handle IRA accounts and how they are taxed to the beneficiary.

See:
Retirement Topics - Beneficiary

There will be no federal estate taxes (as long as her estate when she dies is worth less than the exemption - but don't forget that the exemption is scheduled to revert back to $1M in 2011), and there is no federal inheritance taxes. However, depending on which state your aunt lives in, it's possible that there may be a state estate tax to worry about. And depending in what state(s) the sisters live, they may have inheritance tax consequences as well.