The key to saving estate taxes is to start transferring stock to family members before the stock becomes too valuable. That's true whether you plan to go public eventually (see "Steps to Take Before an IPO," Finance, November 1995, [Article link]) or simply envision a fast-growth course for your company. Here are some guidelines from Michael Fay, a senior partner at Boston law firm Hale and Dorr.

· Gifts to children. Your goal: to transfer as much as you can -- either directly or to beneficial trusts in your kids' names -- at the lowest value. "This can be fairly simple, keeping in mind the IRS's $10,000 annual exclusion limit," notes Fay. "It permits a husband and wife to each transfer $10,000 worth of stock to each child without incurring any taxes."

Imagine the case of a business owner who plans to go public next year. Here's how she could transfer $90,000 worth of stock to her two children -- tax-free. "The first $40,000 worth of the transfer would be tax-free because of the annual exclusion," explains Fay. (The entrepreneur and her husband would each transfer $10,000 worth of stock to the two children, for a total of $40,000.) "The remaining $50,000 would also be free of taxes, because each person gets a $600,000 lifetime exemption from either gift or estate taxes. With this gift, each spouse would use $25,000 of that exemption."

· Gifts to parents. Here's why it makes sense to give stock to parents or in-laws. They too can bequeath $600,000 to others, free of estate taxes. So, you can give stock to each of them and, until their estates reach $600,000, "they can pass that stock along, tax-free, to your children." The same $10,000 annual gift-tax exclusion applies to gifts to your parents.

· Gifts to a spouse. If your spouse isn't already a co-owner, things get tricky. Do you want to transfer a large ownership stake? After all, divorces do happen, even in the best-laid estate plans.