The purpose of the estate tax is not so much to ensure that the capital being taxed is put to better use (which I'm not sure would be the case on average; the government would surely be a better entity to entrust with the money than a profligate son, but those are not the norm from what I can tell, and wiser offspring could be better investors than Uncle Sam), as to ensure the continuation of the meritocracy in our society. By their inherited wealth, scions of prominent families can exercise significant power over the rest of the nation, and this power will tend to be exercised to the detriment of meritocracy, since a system that rewards talent and energy runs exactly contrary to the interests of the inherited-wealth class. (Humans care about relative wealth and power socially, even though absolute wealth production is not a zero-sum game)

However, it is true that being able to pass on wealth to one's children can be an incentive to produce more, so that on the other hand points to the benefit of a lower estate tax.

So, I think the best compromise is somewhere between the pro-meritocracy 100% tax and the pro-short-term-productivity 0% tax; that way there is still a significant incentive to earn for one's offspring, but if 1/x of the money is taxed away in each generation (and the important thing is not where it goes, but that it is taken out of the hands of the rich family), there is an exponential-decay curve for the wealth and power of the family. However, it's important that the tax is high enough to counteract the interest gains that even uninspired investing can bring. I won't venture to propose a sweet spot, but I think that approach should provide the most balance and social benefit overall.