If this is not inheritance and just considered a gift, would this gift need to be less than $10,000/year to escape a gift levy by the IRS?

If your grandmother's estate distributed the money to your mother and your mother then gave each of her children $15,000, this would not be considered an inheritance. It would be a gift from your mother that would require your mother to file a gift tax return. Because the applicable gift tax exclusion amount in 2013 is $5,250,000, there would be no gift tax on the gifts unless your mother has already used up this exclusion amount. If your mother wanted to avoid even the requirement to file a gift tax return or to use any of her gift tax exclusion, she can give each child up to $14,000 in 2013 and the balance in 2014. The annual exclusion from gifts increased to $14,000 per gift beneficiary in 2013. You and your siblings would only have an inheritance of the funds from your grandmother's estate if your mother made a "qualified disclaimer" of interest in the funds in your grandmother's estate and the provisions for distributing those funds provided they would go to you in the event of a disclaimer or if your mother predeceased your grandmother. Using disclaimers can be very complicated. Because there will be no need to file a gift tax return and no gift taxes, it would be much easier for your mother to make of a gift of $14,000 or less to each child this year and the rest of the gift next year. The federal death tax is an estate tax based upon the value of the decedent's estate. For decedent's dying in 2013, the value of the taxable estate must exceed $5,000,000, before there is any estate tax. If your grandmother's estate was less than $5,000,000, there would be no estate tax on the funds regardless to whom the funds were distributed. If it was over that, the representative of your grandmother's estate should have taken care of filing the estate tax return and paying any estate taxes before distributing the funds of the estate to your mother or any of the other beneficiaries of the estate.

This is not an inheritance, it is a gift. California has no inheritance tax. You mother can give each of you up to $`14,000 during 2013 (and again during each taxable year in the future) without even needing to file a gift tax return. Since she may still want to give you other gifts this year, let her give $10-13,000 now, and give the rest in January. Then she does not even need to file a return. (The lifetime exclusion is $5.25 million. If her net worth is that high, or anywhere close to it, she should consult a lawyer.)