Ready for retirement?

• Author: Anderson, Tracey A.
• Position: Business owners

A look at the pertinent issues for business owners

Retirement and estate planning are so intertwined as to be virtually one and the same. Most estate/retirement plans are, by their nature, flexible in order to satisfy the individual's ever-changing needs. They should be periodically reviewed in order to ensure that they continue to serve the purpose for which they were created.

A person contemplating retirement should determine the amount of income that will be readily available to him at retirement. Recent studies indicate that 75 to 95 percent of pre-retirement income may be needed to allow for the same post-retirement standard of living. A statement of estimated benefits should be requested from the Social Security Administration, and an estimate of employer retirement benefits should be obtained. It may come as a shock to learn that these sources comprise only 50 percent to 60 percent of the income needed, and significant personal savings will be required to make up the difference. Therefore, retirement planning should be started early and reviewed annually, preferably with one's accountant, attorney or other financial adviser.

Understandably, take-charge business owners may find it difficult to turn over the reins of control to others at the time of retirement. Though eagerly anticipated, the reality of gearing down to a retirement mode may prove difficult. To assure an orderly transition and avoid the chaos that may result from an abrupt change in leadership, it is advisable to carefully plan for this inevitable occurrence.

While it is probably the intent of the business owner to pass the business to those family members actually involved in its operation, the owner may be very concerned about family members not involved in the business. To treat all family members equally, the owner may designate that those members who receive business property receive little or none of the business owner's other property and vice versa. This is not a major problem if the business owner has sufficient business and non-business assets to treat the family members equally.

The importance of timely estate/retirement planning is never more evident than when contemplating the consequences of dying intestate (without a will). The way the law requires estates to be divided in the absence of a will is very likely different from any plan the deceased would have chosen. For instance, in Indiana, in a first marriage situation with surviving children, the statute...