There is an npc in town near your shared stash that appears once you complete the main storyline. I am pretty sure there is a minimum level to retire, but its something like level 20 or 25, which you should easily be if you have just completed the main storyline. When you retire, the character appears as a ghost on your character select screen, and becomes unplayable. The requirements of the item you pass on are lowered, and the stats/defense/damage of are increased. While this initially doesnt seem like a huge benefit, if you pass down a very powerful item that has been enchanted a bunch.... it makes it stronger. Ultimately, repeatedly passing down gear is the way to create the most powerful items in the game. There is also a tiny perk for your descendant... if its the first descendant it starts off as fame level 2, second, fame level 3, third, fame level 4, etc.