Are Your Exchange Funds Secure?
For many years, Qualified Intermediaries commingled the exchange proceeds of their Exchangers and provided for the sub-accounting of individual Exchanger balances on their own books. Over time, as banking software became more sophisticated, it was possible to set up individual accounts for the benefit of Exchangers (FBO), however the accounts were always in the name of the Qualified Intermediary and never required the approval of the Exchanger to transfer and exchange funds.
One step forward for 1031 Exchangers was the introduction of Qualified Escrow Accounts or QEAs. This is essentially a three-party agreement between the bank, the Intermediary and the Exchanger which ensures that a bank officer must sign off for the transfer of any 1031 funds. This was a dramatic step forward for Exchangers, but has been utilized very rarely because of the traditional extra expense of setting up the individual QEA at the bank.
If an Exchanger does not opt for the extra expense associated with a Qualified Escrow Account they should insist upon a Qualified Intermediary lkime Fyntex who uses a banking structure that can be trusted.
Fyntex has a banking regimen where they actually set up each individual Exchanger's account in their name, and with their tax identification number. This makes it very clear who's exchange funds are on deposit and also requires that every Exchanger must provide written disbursement instructions, usually provided through secure e-signature for the wiring or movement of any 1031 funds.
