Ordinarily, an asset must be valued at its "fair market value " on the date of death (or alternate valuation date). If the samll business value is at least 50% of the value of the decedent's gross estate, it may qualify for "special use valuation" which, as of 2009, could reduce estate taxes by as much as $450,000.
There are catches, however.
Life insurance policies payouts are tax-free, since they are legally and financially considered an "equal value replacement". This is why life insurance is an essential part of the "rich and famous" estate-tax planning. Also explains why insurance companies, on average, but not vocally, are not in favor of eliminating estate tax.