It could be setup like that but it's not. You don't pay capital gains at the time of death and the people you give it to don't pay when they receive it so only some of the money is ever taxed.
PS: The really sick thing is giving stock to a charity: "By doing so, you never have to calculate gains nor list the sale as income on your tax return. Moreover, if the stock was held more than a year (long-term gain), you get to itemize the charitable deduction at fair market value on the date of gift." (http://invest-faq.com/cbc/tax-cap-gains-basis.html)
To find out why this is messed up calculate what happens when you give 100$ to charity now vs buying 100$ in stock that is worth 10x a much in 20 years. I had an aunt who was audited and ended up getting close to a million back because of this stuff.
PS: The really sick thing is giving stock to a charity: "By doing so, you never have to calculate gains nor list the sale as income on your tax return. Moreover, if the stock was held more than a year (long-term gain), you get to itemize the charitable deduction at fair market value on the date of gift." (http://invest-faq.com/cbc/tax-cap-gains-basis.html)
To find out why this is messed up calculate what happens when you give 100$ to charity now vs buying 100$ in stock that is worth 10x a much in 20 years. I had an aunt who was audited and ended up getting close to a million back because of this stuff.