The security of the sale proceeds arising from an exchange can run the gamut from one Qualified Intermediary to another. Some commingle all of the 1031 funds from all their exchanges into one omnibus account. This provides the individual Exchanger with virtually no protection and puts them and their hard-earned proceeds at the mercy of the QI and their bank. It also negates the availability of FDIC insurance coverage of up to $250,000. Others will create segregated accounts or even offer a Qualified Escrow Account where the bank custodian becomes a partner with the Exchanger amd Inyermediary to guarantee the available of the exchange proceeds when it is time to acquire a replacement property. We believe the structure which best benefits the Exchanger is when the individual 1031 exchange account is created in the name of the Exchanger and with the Exchanger's tax identfication number. This at least identifies the true beneficiary of the 1031 funds. Additionally, we believe that the Exchanger needs to have 24/7 visibility into the account and the account must be at a large, established bank, which is frankly 'too big too fail.

The risk to an Exchanger that their personal or transactional data can escape the confines of a secure environment are dramatically increased in a 1031 exchange. This is because in an exchange transaction there are always multiple properties and multiple closings, and closing personnel involved. Add to this the rampant use of free email platforms like Gmail and Yahoo, and the potential for data being hacked and handled improperly is magnified.

If your Qualified Intermediary of choice still uses Microsoft Word for exchange document creation and distributes items via a less than encrypted communications protocol, you are at risk. We only refer clients to Qualified Intermediaries who process and facilitates their exchanges within an encrypted environment where all data is fully secured while in transit or at risk. This in itself doesn't eliminate all the risk, but it goes a long way to knowing your information is as safe as you can make it.