 That's a mistake, say a trio of specialists: wealth management adviser Haitham
"Hutch" Ashoo, CPA Jim Kohles and estate planning attorney John Hartog.
"Whether you're selling your company, passing it along to a successor or simply
retiring, that's a potentially irreversible life event -- you've got just one
chance to get it right," says Ashoo, CEO of Pillar Wealth Management.
A 2012 survey of CEOs by executive search firm Witt/Kieffer found that 71
percent of those age 55-59 have no retirement plan, although 73 percent look
forward to more recreational and leisure activities when they let go of the
reins.
"A lot of baby boomers have the idea that they're just going to work till
they stop working," says Kohles, chairman of RINA accountancy corporation. "If
they hope to do certain things in retirement and maintain a certain lifestyle,
they're likely to end up disappointed."
Planning for the transition from CEO to retiree should incorporate everything
-- including what happens to your assets after you're gone, adds John Hartog of
Hartog & Baer Trust and Estate Law.
"Many of my clients worry about what effects a large inheritance will have on
their children -- they want to continue parenting from the grave. You can, but
should think hard about doing that," he says.
The three say smart planning requires coordinating among all of your
advisers; that's the best way to avoid an irrevocable mistake. With that in
mind, Ashoo, Kohles and Hartog offer these suggestions and considerations from
their respective areas of expertise:
Haitham "Hutch" Ashoo: Identify your specific lifestyle goals for
retirement so you can plan for funding them.
To determine how much money you'll need, you have to have a clear picture of
what you want, Ashoo says. Do you see yourself on your own yacht? Providing seed
capital for your children to buy a business? Pursuing charitable endeavors?
Each goal will have a dollar amount attached, and you or your adviser can
then determine whether it's feasible and, if so, put together a financial plan.
"But you can't just create a plan and forget it. You need to monitor its
progress regularly and make adjustments to make sure you're staying on course,
just like you would if you were sailing or flying," Ashoo says. "We run our
clients' plans quarterly."
It's also imperative that you don't take any undue risks -- that is, risks
beyond what's necessary to meet your goals, he says.
"You may hear about a great investment opportunity and want in on it, but if
you lose that money, you may not have a chance to make it up."
Jim Kohles: Don't sell yourself short when selling your business.
"If you're banking on money from the sale of your business, know that it's
unlikely you'll have investors just waiting with the cash for the chance to buy
it when you're ready to sell," Kohles says.
Buyers are more likely to offer to pay over time from the company's future
earnings -- which leaves the retired CEO with no control over the business and
utterly reliant on the new owners to maintain its profitability.
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Kohles says a good alternative is to establish an ESOP: an S
corporation combined with an employee stock ownership plan.
"You're selling the company to the employees while retaining
control until you phase yourself completely out," he says. "The ESOP
doesn't pay income taxes -- the employees do when they retire. And
you don't pay taxes on the money or the stock that you contribute."
John Hartog: What do you want your kids' inheritance to
say?
If you have children, this decision can change their lives for
the better -- or the worse.
"How your assets are disposed of should reflect your values,"
Hartog says. "A lot of people prefer to think in terms of taxes at
the expense of values. I advise against that."
For children, incentive trusts can encourage, or discourage,
certain behaviors.
"If you're concerned your adult child won't be productive if he
has a lot of money, set up a trust that will make distributions
equal to what the child earns himself," Hartog says.
"Or, if you want to be supportive of a child who's doing
something socially responsible, like teaching in an impoverished
area, you can set it up to pay twice his salary."
There are many creative ways to establish trusts, Hartog says.
Plan about five years out, and change the trust as life events
dictate.
___
Haitham "Hutch" Ashoo is the CEO of
Pillar Wealth Management LLC
in Walnut Creek, Calif. The firm specializes in client-centered
wealth management for ultra-affluent families.
Jim Kohles is chairman of the board of
RINA accountancy corporation,
Walnut Creek, Calif. A certified public accountant for more than 35
years, he specializes in business consulting, succession and
retirement planning, and insurance.
John Hartog is a partner at
Hartog & Baer Trust and Estate Law. A certified specialist in
estate planning, trust and probate law, and taxation law, he has
been selected to the Super Lawyers Top 100 list for nine consecutive
years.
[Text from file
received from News and
Experts]
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