If you plan to take your company public, take precautionary measures before your initial public offering -- otherwise, estate taxes could ravage the wealth you've built up in your business. "Many business owners don't realize that if they delay passing assets on to their heirs until after the IPO, when the value of the stock has increased, they'll lose up to 55% of the increased value to estate taxes," says Michael L. Fay, a senior partner at Boston law firm Hale and Dorr.

If, instead, you give away some stock before the IPO, "its value will probably be much lower," explains Fay. You and your spouse can each give up to $10,000 worth of stock, cash, or other gifts annually to each of your heirs without incurring any gift-tax liability. "Any amount over that is counted against your lifetime gift- and estate-tax exclusion of $600,000 per spouse," notes Fay. "What all this means is, the lower the value of your stock when you give it away, the less of a chance there is that you or your heirs will wind up paying tax on it."

One caveat: "You can't give away the stock just a few weeks before the IPO," warns Fay, "because the IRS might say that its value was nearly the same as that of the public stock shares." The best way to avoid trouble with the tax man is to make your gift a year or more before the IPO.

Should you hire a professional appraiser each time you transfer stock? Fay believes appraisers are too expensive for modest gifts. Instead, he urges business owners to consult IRS Revenue Ruling 59-60, which details the standards for determining the value of private stock. "Keep a formal record of the valuation method you relied on at transfer time. Then file a gift-tax return by April 15 of the year following the gift. That starts a three-year statute of limitations in case the IRS wants to challenge the taxable value of your gift."