What happens to my bitcoins when I die? What happens to my bitcoins when I die?
Are they lost in the network?
This depends a lot on how you handle your wallet. If you are careful about it and make sure you have an off-site backup of your wallet (or use a deterministic or paper wallet, etc) then you can easily pass your wallet and all the coins it contains to anyone you choose in the same ways that you can pass on other property.

Of course if you're the only person with access to the wallet and have not planned anything then yes, your bitcoins will be "lost in the network."