Taxes are levied upon a decedent at both the federal and state level. At the state level, such taxes are commonly referred to as inheritance taxes while at the federal level such taxes are commonly referred to as estate taxes.
The estate of the decedent is subject to estate taxes if it exceeds certain an exemption threshold, which is $5,430,000 for an individual and $10,860,000 for a married couple for the 2015 tax year. The size of the estate can be reduced by making gifts up to the the annual exclusion limit ($14,000 per person in 2015). Gifts over and above this exclusion limit will trigger the gift tax and will require that a gift tax return be filed. Gifts to certain persons and entities can be unlimited and are not subject the the annual exclusion limit. These include gifts to your spouse, gifts to certain charities, gifts related to certain higher education expenses, and gifts related to certain medical expenses.