It is not always clear to exchangers doing a 1031 exchange how their funds are being held. Shockingly, they don’t often know much about their Qualified Intermediary (QI) either. Many people select a QI without conducting much preliminary research simply because the QI was mentioned by a real estate agent or a friend.
A Qualified Intermediary plays a critical role in the successful execution of the 1031 exchange. One of their many responsibilities is to hold exchangers’ funds to ensure that the exchanger does not fully control or benefit from the sales proceeds during the exchange period. At the time of the replacement closing, the QI is responsible for getting these funds applied toward the new asset.
But what could happen if the QI has been commingling your funds with the funds of people you don’t even know?
The commingling of exchangers’ funds or QI operating funds with exchangers’ funds by QIs is a very risky practice that unfortunately is more common than it should be.
Many Qualified Intermediaries charge very low fees just to nab an exchange and then commingle their clients’ funds because it’s easier to do so. The QI typically generates greater revenues this way as well. However, if something were to go wrong, a client’s funds could be lost, the account frozen pending the adjudication of a lawsuit, the funds could be subject to the claims of the QI’s creditors or other exchangers, and the QI may face criminal charges in certain states.
NES Financial does not follow this practice. We treat our clients’ hard-earned money with the utmost care. Each client gets his/her own segregated trust or escrow account where their funds are held solely for purposes of their exchange. Our 1031 Exchange Solutions were built upon the principles of security, transparency, and compliance, so you know where and how your funds are being held at all times.
Not only are funds segregated, but each account is FDIC insured, so you can rest assured knowing your exchange funds are being held safely.
Don’t make the mistake of going with a QI on a whim and risk losing your hard earned money. Choose NES Financial, the premier QI to more Fortune 500 companies than any other independent QI in the country.
What is a 1031 exchange? Find out more by downloading our 1031 Exchange Kit.
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