There are hundreds of 1031 like-kind exchange providers in the US, and any business looking to do LKEs, whether it’s one single exchange or a huge program, is advised to ask a lot of questions to make sure they’ve found the best provider for their requirements. Some of these questions are probably obvious to any experienced businessperson. You’re looking for a business with expertise in your industry (if you’re exchanging heavy equipment, a qualified intermediary [QI] that has only done real estate is probably not the right choice), for example. If you’re going to be conducting more complex exchanges (reverse, improvement or full programs) then you’re looking for a larger, more sophisticated provider. You’ll want to know about the firm’s client service program, as well.

However, the array of important questions doesn’t end there - the 1031 industry can be complex (as is the case with all tax and financial services activities), and as a result we encourage you to dive as deeply into the due diligence process as possible when vetting a potential provider. We obviously think we’re a pretty good answer for most exchange situations, but whether you’re considering Accruit or not, here are some important questions that need detailed answers before you sign up with any QI.

• Is the company a member of the Federation of Exchange Accommodators, the industry’s professional trade organization? The FEA works with its member organizations to develop best practice guidelines and industry ethical codes. If a QI isn’t a member, you should find out why.
• Will your funds be held in dedicated accounts? Under no circumstances should a 1031 exchange provider commingle client funds with their own operating accounts.
• How will your funds be invested? Your money should be held in a highly-rated financial institution with investment procedures designed to assure 100 percent liquidity.
• Is the QI fidelity bonded and errors and omissions insured?
• Is the QI in full compliance with any state laws governing the activities of exchange accommodators? At present 1031 providers are regulated in Colorado, Washington, California, Idaho, Maine, Nevada and Oregon; several other states are currently considering regulation.
• Does the exchange provider secure client information in an audited data center? Rigorous certification processes (such as ISO 9001 or SAS 70) can afford the client the highest level of security available. Security solutions should provide 24/7/365 internet surveillance, secured access monitoring and tracking, encryption and certification, multiple physical layers of security and multiple layers of redundancy.

If you have any further questions, have a look around the Web site - we’ve included a wide range of resources that may answer your questions (including questions you didn’t even know you had), and if you’re still in need of more information e-mail me or give me a call at 866.397.1031 x112. If I don’t know the answer, I can quickly hook you up with someone who does.