When I select a qualified intermediary to handle my 1031 tax deferred exchange, what safeguards can I take to insure that my money will be safe in their hands? The answer to this question is an important one since your investment property equity can be a substantial part of your overall wealth. Most qualified intermediaries are reputable, honest and ethical, but like all businesses it only takes one or two making newspaper headlines to cast doubt on an entire industry.
Some of the questions that you ask a qualified intermediary before you make your choice should include the following:
1. Will my money be placed in a segregated account rather than a pooled account with other exchanger's money? You want your funds placed in a separate account which is FDIC insured up to the legal limit per depositor rather than a pooled account which will contain all the combined funds from all of the exchange clients. You will want a separate account set up using your taxpayer ID number.
2. Does the QI carry a Fidelity Bond and E&O insurance? A fidelity bond helps cover the loss a QI may suffer due to a dishonest act by one of its Employees. Errors & Omission or professional liability insurance protects against claims that something was handled incorrectly. In both cases these types of insurance policies will go a long way in enabling the QI to have the resources to protect your money.
3. What kind of internal processes and audit controls does the QI have in place? Will you receive an account statement or have access to an online account? Bankers Exchange Services is wholly owned by Bay Commercial Bank with branches in the East Bay and Southern California. Because we are bank owned we fall under the very strict regulations that govern our bank.
4. What is the technical ability of the staff employed by the QI? You want to work with someone who can answer your questions in a clear and concise way and explain the process simply. Bankers Exchange Services has highly trained professionals to assist you, including two certified exchange specialists® and an advisory attorney on staff. With the help of your tax advisor we can guide you effortlessly through the process and save you thousands of tax dollars.
Remember there is no substitute for effective tax planning! We at Bankers Exchange Services are committed to helping you achieve your wealth building goals. If you have any questions or would like to discuss any aspect of a 1031 exchange give us a call at (877) 989-1031.