1. Exit & Succession Strategies for BOLD Farmers and Ranchers

2. A00000-0000 Disclosure This information is a general discussion of the relevant federal tax laws. It is not intended for, nor can it be used by any taxpayer for the purpose of avoiding federal tax penalties. This information is provided to support the promotion or marketing of ideas that may benefit a taxpayer. Taxpayers should seek the advice of their own tax and legal advisors regarding any tax and legal issues applicable to their specific circumstances.

3. A00000-0000 Agenda What is BOLD? The BOLD Process Exit & Succession solutions for BOLD Farmers and Ranchers

4. A00000-0000 BOLD strategies for a BOLD way of life

5. A00000-0000 What is a BOLD Farmer? BOLD stands for Business Owner Life-Stage Design BOLD Farmer is a specialized process for only farmers, ranchers and agricultural professionals to: –Review where their current situation –Determine their financial priorities –Outline an Exit/Succession track to exit the farming operation

6. A00000-0000 Farmers & Ranchers Problem #1 – Financial Concerns

7. A00000-0000 Farmers & Ranchers Problem #2 – Prioritizing Financial Decisions Where do I start? Do I handle all of these concerns at the same time? Do I handle the personal concerns first, then business concerns? Is there a roadmap?

8. A00000-0000 Next, let’s put together a roadmap… Stakeholders –Who is coming along? Life-Stages –Where you are and where you are going? Routes –Personal, business, or both Areas –6 BOLD Priorities

9. A00000-0000 Stakeholders All farmers and ranchers have stakeholders in their business and their personal financial strategies –Farmer and Their Family –Employees –Business

10. A00000-0000 Life-Stages

11. A00000-0000 Routes – personal and/or business

12. A00000-0000 Six BOLD Priorities – What areas are you going to travel through?

13. A00000-0000 Exit and succession strategies for farmers and ranchers

14. A00000-0000 Three Questions 1.Who do I want to transition the farm to? –Family member –Third party 2.When do I want to transition out of the farm? –At retirement –At death 3.How do I want to transition the business or farm? –Depends on who and when

15. A00000-0000 Two Approaches 1.Exit Strategies –Transferring farm to a third party –During lifetime or at death –Strategies need to be income tax efficient 2.Family Succession Strategies –Transferring farm to a family member –During lifetime or at death –Strategies need to be income and estate tax efficient

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18. Exit Strategies Transferring to an unrelated third party During Lifetime –Sell farm at retirement –Retain ownership and rent land and/or farm At death –One-way buy-sell

19. A00000-0000 Sell Farm at Retirement TransactionArrange sale to a third party or key employee Legal transactions or documents Sale, installment note, or contract for deed Tax ramifications Income tax ramifications  Capital gains on difference between sales price and basis  Ordinary income on any interest charged Retirement Planning Proceeds of sale used for retirement and remaining proceeds distributed to heirs Concerns  Finding a buyer  Getting a fair market price

20. A00000-0000 Retain Ownership and Rent Land and/or Farm Transaction During Lifetime - Arrange rental agreement with a third party or key employee At Death – Arrange an one-way buy-sell Legal transactions or documents During Lifetime - Rental agreement (cash or crop lease) At Death – Buy-Sell agreement with unrelated 3 rd party Tax ramifications Income tax ramifications  Rental Income – Ordinary income  Passive activity income? Estate tax ramifications  Fair market value of the farm will be included in your estate at death (value may be determined by the valuation in the buy-sell agreement Retirement PlanningUse rental income for retirement objectives Concerns  Finding a renter  Getting a fair market price

21. A00000-0000 Key strategy – One-way Buy-sell

22. A00000-0000 What is a One-Way Buy-Sell? Farmer and a third party enter into a buy-sell arrangement where the third party will purchase the farming business at the death of the farmer Typically funded with a life insurance policy

23. A00000-0000 One-way Buy-Sell

24. A00000-0000 One-way Buy-Sell

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26. Family Succession Strategies Transferring to a family member(s) During Lifetime –Lifetime gift –Retain ownership and rent land and/or farm At Death –Estate Equalization –Family Buy-Sell

27. A00000-0000 Family Succession Strategies Tax issues –Income tax ramifications –Estate tax ramifications –Gift tax ramifications Family issues –Treating everyone “equally” or “fairly”

28. A00000-0000 Key strategy – Estate equalization

29. A00000-0000 Transfer at Death (Estate Equalization) Farmer (and spouse) bequests the farm operation to one child at death of both spouses Parents then set up a life insurance arrangement or ILIT for the benefit of the other children –Typically funded with a second-to-die life insurance policy

30. A00000-0000 Estate Equalization

31. A00000-0000 Key strategy – Family Buy-sell

32. A00000-0000 Family Buy-Sell Farmer (and spouse) bequests the farm operation to farming child at death of both spouses Parents then set up a life insurance arrangement or ILIT for the benefit of the other children –Typically funded with a second-to-die life insurance policy –Issue – equality or fairness?

33. A00000-0000 Family Buy-Sell

34. A00000-0000 Family Buy-Sell

35. A00000-0000 Next Steps … Work with advisors who: Have a process that creates a set of solutions specifically for you Will treat your land, legacy and heritage with the respect they deserve Then YOU can rest easier knowing you’ve implemented strategies to provide for yourself and your loved ones

36. A00000-0000 Next Steps … Please take our BOLD Initial Exit and Succession Questionnaire for Farmers and Ranchers Take some time to reflect and answer the questions Set up an initial meeting with your advisor(s) to start the process

37. A00000-0000 Questions? Guarantees are based on the claims-paying ability of Minnesota Life Insurance Company. Life insurance products contain fees, such as mortality and expense charges, and may contain restrictions, such as surrender periods. Policy loans and withdrawals may create an adverse tax result in the event of a lapse or policy surrender, and will reduce both the cash value and death benefit. Please keep in mind that the primary reason to purchase a life insurance product is the death benefit. Thank you for attending Securian Financial Group, Inc. www.securian.com 400 Robert Street North St. Paul, MN 55101-2098 ©2013 Securian Financial Group, Inc. All rights reserved. A04669-1213 DOFU 1/2014