What You Need to Consider When Choosing a 1031 Exchange Facilitator
1031 exchanges involve complicated processes, therefore, it is crucial to evaluate the exchange company you are considering before making your decision. Here are tips for choosing the right exchange facilitator.
The exchange process can be quite overwhelming, therefore, make sure that your qualified intermediary is experienced and knowledgeable in handling exchanges and the law that governs them. The accommodator should have the necessary experience required to handle 1031 exchange properties for sale including the most difficult ones. A good way to determine their experience is to ask the facilitator how many exchanges they have successfully completed in the past. They will also be able to help you understand your situation and guide you on making the right options.
You may want to ask for a list of references and delaware statutory trust in order to help you evaluate the experience and capability of the accommodator. See if the references are satisfied with the services provided or whether they have complaints against the exchange accommodator. This will help you narrow down your list of potential 1031 exchange facilitators.
Ask various exchange companies where they are going to hold your funds before you make any decision. The facilitators should have various reliable options for holding your funds. It is advisable to ensure that your funds are held in a segregated qualified trust or in an escrow account which are safer than other accounts. Be vigilant of firms that does not allow you to choose the bank of your choice or one that does not agree with your preference.
In order to get the best exchange services, you need to ensure that you select a full-time exchange firm. This is prudent so that they can be updated with the latest tax code changes and rulings and help you apply them to your situation.
A good company will conduct a background check on its employees to ensure that they have no criminal records. This is an effective measure of minimizing risk of loss of your 1031 exchange fund. It is also advisable to get a copy of internal control that ensures no employees have control of your funds.
Request for a copy of the insurance coverage and verify that the qualified intermediary has adequate fidelity bond insurance coverage. The insurance is also critical so that you will not have to pay taxes because of the firm’s negligence.
Lastly, when choosing an exchange facilitator, you need to ensure they have a good reputation. You may want to choose a facilitator that has membership in a recognized professional organization such as Federation of Exchange Accommodators.