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How well do you know your Qualified Intermediary (QI)?

In many transactions involving 1031 exchanges, selecting a Qualified Intermediary (“QI”) seems to be something of an afterthought.  Some naïve consumers even ask the question “What’s the big deal, aren’t QIs all the same?” QIs are definitely NOT all the same.

Finding a QI is easy, but finding the right QI that adheres to the most stringent operational and security standards in the industry is not so easy and requires work and the right questions. It is hard to believe that many consumers still do not put much consideration into their QI selection, but it can make the difference between a successful 1031 exchange and possibly losing some or all of their hard-earned 1031 exchange funds.

It is estimated that approximately a billion dollars of exchange funds have been lost over the last decade due to financial mismanagement and unethical behavior by numerous QIs.  This happens when QIs are not completely transparent as to where and how clients’ exchange funds are invested. Some QIs do not offer their clients the security, transparency and expertise they need for a successful 1031 exchange and other QIs have even used their clients’ 1031 exchange funds for their own personal interests.  Nobody should be a victim and lose their 1031 exchange funds because of the inappropriate actions of a QI.

If you know what to look for in a QI and ask the right questions, then finding a trustworthy QI can be easily accomplished.  In addition to finding a QI with a proven record of excellence and an impeccable reputation, your 1031 exchange funds should be held in a segregated trust or escrow account under your Federal tax ID number or SSN.  Keeping your 1031 exchange funds separate from the QI’s operating capital can provide added bankruptcy protection. A reputable QI will provide actual documentation to show you where your 1031 exchange funds are invested.  You want to hire the right QI which is one that always adheres to the most stringent operational and security standards in the industry.

As the nation’s leading provider of 1031 Like-Kind Exchange and Qualified Intermediary services, NES Financial offers its clients the highest level of funds security, transactional transparency, and regulatory compliance, including:

  • Offering clients 24/7 online viewing of their funds and offering superior reporting capabilities.
  • Possessing extensive subject-matter expertise to support the most strategic financial 1031 exchange process through our General Counsel, who developed major 1031 guidance while at the IRS National Office, and our expert client service personnel.
  • Holding exchange funds in segregated qualified escrow or qualified trust accounts to prevent commingling of deposits.
  • Creating account structures that meet the most rigorous security standards in the industry, including depositing funds with FDIC insured banks and requiring dual authorization by the exchanger and the QI for disbursements.

Selecting the right QI shouldn’t be an afterthought; it should be a priority and big deal to you!  For more information about Best Practices in 1031, click here.

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2017-04-30T02:26:16+00:00 August 22nd, 2012|Categories: 1031 Exchange, Industry News, Uncategorized|Tags: |