While planning for a 1031 exchange, choosing a qualified intermediary is the last thing that comes to the mind of investors. The importance of qualified intermediaries is more than you have imagined. Also, it is important to do a research because a lot of QIs are not regulated.
Here are some questions you should ask a QI before finalizing for exchange process.
Question 1: How will you hold my funds?
Insist the QI to hold your funds in a Segregated Qualified Escrow Account or Segregated Qualified Trust Account. Do not settle on low cost options, such as commingled account.
Question 2: Where will you hold my funds?
Make sure the answer is a large, renowned FDIC Insured bank. It is necessary to note that FDIC insurance usually has a maximum limit of 250,000 dollars per account holder.
Question 3: Can you provide me with the written copy of internal controls?
The procedures and policies that protect the funds against fraud and thefts are known as internal controls. Through the internal controls, you will know about the oversight, approvals, and steps needed to move/release the money.
Question 4: How long have you been in business?
The experience of the QI in understanding the regulations and handling exchanges is proportional to the number of years the QI has remained in the business.
Answer to these questions will help you find a reputable QI that will not only ensure smooth handling 1031 exchange but will also advice you through different stages.
If you are looking for replacement property in Massachusetts, contact FAI Exchange. The firm will also help in finding a QI for the exchange process.
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