The IRS has a tax on any property passing from one person to another when the one receiving the property, the donee, does not pay for it.  Most people have heard of the gift tax, and also have heard of the estate tax.  But did you know that they are actually the same tax?  The only difference is the annual exclusion from gift tax of $10,000.  Lets say Mom wants to give you everything she owns, which comes to $1,010,000.  Lets also assume it is after January 1, 2002, when the exemption amount from the gift and estate tax is $1 Million.  She can transfer her estate to you one of two ways: 1) giving it to you during her life time, a gift, or 2) leaving it to you in her will, an inheritance.  Under the first, the gift, the entire amount goes to you tax free, using up the annual exclusion of $10,000 and the lifetime exemption of $1 Million, so no tax is owed.  Note that if she had additional property that she wanted to leave you, it would all be subject to tax, even if it only passes after her death.  If she were to leave these assets to you on her death, still worth $1,010,000, there would be a taxed owed only on the $10,000, as the other $1 Million is exempt from tax.  So you can see why giving away property early is a key component of any planning to reduce a taxable estate.