Baby Boomers planning for retirement need to stick to a budget, according to one tax expert.

At a conference entitled "Navigating the Baby Boomer Crisis," presented by Berdon LLP, headquartered in New York City, Scott Ditman, a partner in the firm's tax department, recommended that the first step for Baby Boomers considering retirement is the creation of an anticipated budget based on fixed and discretionary expenses and matching that against anticipated income. He also recommended tracking that income and spending for a year to see if the estimates are accurate.

To free up money for investment and to possibly cut expenses, he suggests downsizing one's residence and reviewing insurance, including investigating tax-free exchanges of policies to reduce annual premiums.

Maury Golbert, also a partner in Berdon's tax department and a member of the firm's executive committee, said at the conference that he sees opportunities in these tough economic times for business owners to transfer wealth at little or no tax cost. He identified a number of techniques for transferring a 49 percent interest in a business, including a sale with partial or full financing by a loan at the applicable federal rate, a transfer to an intentionally defective grantor trust, or a transfer to a grantor-retained annuity trust.

The possibility of entering a joint venture with a competitor or with key employees was also discussed. The owner continues to work, gets compensation and an annual return on capital, and receives capital back on the sale with the remaining proceeds split. Key employees don't actually have equity interests and could utilize phantom stock.

For a parent who needs to help children keep a home, Ditman spoke about the parents making an AFR loan and making a gift of the interest forgiven, which is eligible for gift tax exclusion.


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