What if they provided a comfortable lifestyle for their children? Would that just be taken away by the government upon the parent's death?
I agree that it should be paid as an income tax, at the appropriate tax bracket of the inheritor. If it stays within the estate, then at the relevant income tax bracket for the estate.
If there isn't any income tax on estates, then I see your point and that should definitely be changed.
As we live longer, we're also able to have children later, and I know many people in their twenties who have had parents pass away or expect it to happen soon.
Nonetheless, with enough kids, that money doesn't go terribly far in the Bay Area.