As technological advancements continue to streamline and expedite processes, we need to check ourselves and make sure we are not compromising safety and security for the sake of convenience. Many financial institutions have moved to secure systems and electronic verification systems when handling the movement of funds. These systems have been beneficial to both the client and the institution, but if no system is fail proof. In every transaction, you are selecting institutions to trust with holding and handling of your funds, including a 1031 Exchange company. Qualified Intermediaries (QI) operate differently, so you will see variances as to how they hold and process your funds during your exchange. The following are three considerations that you should always verify when selecting your QI.
1. Always verify their reputation and experience. Make sure the QI you select is a well-established and experienced company with years of experience in completing successful exchanges.
2. Require your QI to hold your funds in segregated, dual signature accounts. In the early 2000’s, many QI’s pooled the funds from all their exchanges in one account. This compromised the security of the funds and led to extensive issues in the fall out of the recession. Always ensure your QI does not comingle your funds with the proceeds of other exchanges and that your signature is required to move the funds.
3. Verify the QI’s wire procedures. Many title companies and Qualified Intermediaries utilize encrypted emails and secure systems. Over the last couple years, they have been touted as being the most secure way, but as this last year has taught us, they cannot be solely relied upon. Every taxpayer should insist that their QI call and verbally verify the wire instructions with the recipient of the wire. While it may seem old school, it is a tried-and-true method to confirm both the security and accuracy before sending wires, and it cannot be replaced by electronic systems.
Why you can trust ERG
Here at ERG, we make every effort to protect your funds. Each exchange will have a separate, dual signature segregated account, requiring our signature and our client’s signature to move any funds. We also do not send a wire unless we receive the written wire instructions and are able to verbally verify them with the recipient of the wire. You can trust that ERG will provide you with the guidance and security to confidently complete your 1031 Exchange. With years of experience dating back to 1977, you can trust the expertise and guidance that you will receive when working with ERG. We specialize in both simple and complex exchanges and our team will be there every step of the way.
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