While the estate and gift tax marital deductions apply only to the value of property transferred to your spouse, as a result of something called the "unified credit," a total of up to $675,000 (for those who die in 2000 or 2001) in lifetime gifts and transfers at death can be sheltered from the transfer tax regardless of whom the transfers are made to.
The dollar amount of the unified credit is scheduled to increase in future years. It will rise to $1 million in 2002-2003, $1.5 million in 2004-2005, $2 million in 2006-2008, and $3 million in 2009. The estate tax will be repealed altogether in 2010. If Congress does not act between now and then, the estate tax will be reinstated in 2011 and the unified credit amount will be $1 million.
This suggests that for estates over the applicable exemption amount, at least some of the assets should not be given outright to the spouse; otherwise the exemption amount will be wasted.