Rule 1: Buy the Basics
You can't go wrong with basic tools that will be used again and again. Good choices include wrenches and screwdrivers, a drill and a circular saw, and other multipurpose tools. In other words, you'd be better off buying a random-orbit sander that can be used for both rough and finish work than a high-powered belt sander that will only come in handy once.
Rule 2: Purchase Locally
You may be thinking about buying from a catalog or mail-order supplier, and in terms of the initial purchase price, this plan makes sense. But many craftspeople recommend buying from local dealers. When the time comes to repair the tool, your gift recipient will appreciate that you've established a relationship with a local dealer.
Rule 3: Make Sure the Tool Fits
There is no substitute for examining a tool in person to discover its feel, size, weight, and quality of manufacture. In particular, a hand-held tool like a plane or a chisel needs to feel like an extension of the hand. Since you're making a purchase for someone else, consider placing a gift certificate under the tree rather than the tool itself. Let the gift recipient go to the local store and try out the tool firsthand.
Rule 4: Choose Quality
When shopping for tools, take a close look at those on display. Here's what to check for: double-insulated bodies, quality casting, a sturdy look and feel. One way to spot good-quality power tools is to check that they come with heavy-duty cords of reasonable length. The less expensive a tool, the greater the likelihood it is made of inferior materials or filled with manufacturing defects. A cheap chisel won't hold an edge and the motor on a cheap power tool can burn out fast. Best to go with quality, brand-name tools that have earned their good reputations.
Rule 5: Look for Multipurpose, Not All-Purpose
You can save money by buying fewer tools that are more versatile. Look for those with attachments, say a router that with a simple adapter becomes a biscuit joiner and also cuts mortises. But stay away from tools that claim to do everything. Why? Because they probably can't. I'm sure you've noticed that hammers and chisels still exist long after their invention. The best new tools are usually refinements of earlier ones versus gimmicky new designs.