When a ladder season is over (We haven't finished one yet, so they're fairly long.), all ladder characters are moved to non-ladder with everyone else. They keep all their stuff. Then, players will proceed to make new characters in the new ladder.

You do not have to make new characters. You can stick with your old characters, but you will not be able to get ladder-only items or advance with the majority of the players who move to ladder. (I expect the ladder community to be 20-40% smaller than it is now, which is still a large amount.)

What is it they say about silence being golden?