What is a Qualified Intermediary & How Do I Find One?

For investors investing directly in TICs, DSTs and 1031 Exchanges
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What is a Qualified Intermediary & How Do I Find One?

Post by REIT Wrecks » Tue Jun 08, 2010 12:01 am

The 1031 exchange industry is largely self-regulated, and after the 1031 Tax Group LLC, a privately held group of qualified intermediaries filed for chapter 11 bankruptcy protection in 2007 citing "liquidity issues," the Federation of Exchange Accommodators ("FEA") issued a press release reminding everyone that [url=http://www.reitwrecks.com/forum/download/file.php?mode=view&id=68]its members adhere to a strict Code of Ethics[/url]. Unfortunately, more than $65 million had gone missing, and the owner of 1031 Tax Group was sent to jail. The [url=http://www.1031.org/]FEA[/url] has done a commendable job of policing the QI business, but Qualified Intermediaries often handle enormous sums of money, and you may want more than a strict code of ethics in between your money and potential trouble.

The best way to protect yourself is to use a Qualified Intermediary that offers segregated accounts. This is an account established for your benefit and the qualified intermediary under your tax id number or social security number. The only funds that move through this account are your funds. You should also insist that funds cannot be withdrawn from the segregated account without both your signature and the intermediaries signature. Do not trust your exchange money to pooled or commingled accounts where you have no control over unauthorized withdrawals.

Also, make sure the Qualified Intermediary has insurance. It's not enough that your money is placed in a federally insured account. The Qualified Intermediary itself must have insurance at the corporate level, including Errors and Omissions Insurance and Corporate and Individual employee Fidelity Bonds. Finally, get a list of references and make sure they are up to date.

Your accountant or advisor will usually have a Qualified Intermediary they prefer to work with, so he or she can often help you identify a quality, reputable QI to complete your 1031 exchange without a hitch. If not, or you'd like to do more learn more about Qualified Intermediaries, check http://www.1031.org/
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Re: What is a Qualified Intermediary & How Do I Find One?

Post by Jarvis4 » Mon Jan 06, 2014 2:33 am

Thanks for the post!

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