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How to Start Retirement Conversations with Family


If you're a business owner ready for retirement, ensure your retirement planning strategies are supported by family. Here's how to start the conversation.

For family-business owners with retirement on the horizon, the options to consider are countless.

An owner could sell the business, but owners with children are likely to consider passing the business to the next generation. There are numerous options in this scenario too, especially when multiple children are involved.

Discussing a transition plan with the next generation is an essential first step for an owner to make sure their legacy and their business endure and thrive. Ideally, that process happens at least two years before the transition, said Cary Putrino, managing director, Fifth Third Private Bank, Florida Region.

Engaging a Fifth Third adviser early into these conversations can make the transition go smoothly, Putrino said. “A Fifth Third adviser will consult with their team of specialists to get their input and determine the best-case scenario for the business owner and his or her family, including the spouse, children and grandchildren. The key to our process is involving the full team and exploring all options for the client early in the discussion.”

Reaching a Consensus on Retiring

According to the Conway Center for Family Business in Columbus, Ohio, the mean age of the person controlling a family business is 60.2 years. More than 30% of all family businesses make the transition to the second generation, and the chances of an effective transition and ongoing family harmony improve when more members of the family are actively involved.

It can be very beneficial to include members of the next generation in discussions with the advisory team when drafting the formal succession plan. “It makes a big difference if you’re selling to a family member. The dynamics are different,” said Putrino.

Those dynamics include children with different interests or responsibilities in the company. While one son or daughter may be the ideal candidate to take over as president, other siblings may take less active roles or may not be involved in the business at all. Conversations about culture, how employees will be treated in the future, and what will be done to maintain the business’ reputation are all areas where alignment and agreement are necessary.

A team of Fifth Third advisers can lead conversations between owners and their families that result in a transition structure that treats everyone fairly and equitably. “At Fifth Third, that team includes a wealth planner, portfolio manager, trust officer, high-net-worth insurance specialist, and the client’s attorney and CPA,” said Putrino. “If you’re involving multiple family members, I recommend the business owner identify a member of the team to lead the discussion.”

The Trust Option

According to Putrino, a family business succession plan often involves some children, but not others. Advance planning, with guidance from a professional team, helps to establish each child’s role in the transition so conflict can be avoided when the actual transition takes place.

Establishing trusts, for example, is a way to provide for children who will not be involved in running the business. Once assets are moved into a trust, disbursements can be structured as the existing business owner designates, including periodic distributions over time and allowing withdrawals for life events like health emergencies or education.

“Trusts can give the owner peace of mind for certain situations and ensure each family member has a well thought out plan for their allocated funds,” Putrino said.

The Sooner You Discuss, the Better

Starting conversations early and having open communication about the sale or transition of the business are especially important when families have multiple generations involved.

“We have a client who sold his business to a strategic buyer and used some of the proceeds to establish multi-year dynasty trusts,” Putrino said. “Now we are assembling specialized teams to work with his children, and have even identified opportunities to provide value for his grandchildren.”

Fifth Third encourages families to take a “sooner-is-better” approach to finding the right transition team to guide the process. “We will begin to build a wealth plan and investment program early on,” he said. “Executing a comprehensive plan is much easier when we have sufficient time to get to know the family and understand their goals well in advance of the transaction.”

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