You Need a 5-Year Plan

Focus of SWFL - - Getting - Www.pil­

To­day’s 50-some­thing CEOs tend to have vague dreams of more fish­ing, trav­el­ing or sail­ing when they re­tire, but they don’t know when that might be so they haven’t be­gun plan­ning for it. That’s a mis­take, say a trio of spe­cial­ists: wealth man­age­ment ad­vi­sor 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 71 per­cent of those aged 55 to 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 ad­vi­sors; 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:

1. 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 ad­vi­sor) 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.”

2. 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. A good al­ter­na­tive is to es­tab­lish an S cor­po­ra­tion com­bined with an em­ployee stock own­er­ship plan (ESOP), Kohles says. “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.”

3. 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.

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