True
1031 Stories...
An
Intermediary in
Nebraska invests his clients
exchange funds in Enron
stock and loses all their
money. A Qualified Intermediary
in Hawaii transfers a chunk
of his clients exchange
funds to his personal account
in Hong Kong. A QI in Minnesota
day-trades with his client
funds and goes bankrupt,
and the judge
orders former clients to
return their own exchange
funds to pay creditors!
Sound like a nightmare?
It is! In every one of these
cases, money parked in separate,
or segregated accounts would
have been protected. The
judge in the last example
made it clear that if segregated
accounts had been used,
the exchangers wouldn’t
have lost their money.
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The
Risk of Commingled Accounts...
If
your Qualified Intermediary
pools all of its clients'
exchange funds into a single,
or "commingled" account,
those funds are at risk
for a variety of reasons.
If
your funds are held in a
commingled account, you
cannot trace or earmark
your particular proceeds.
Rather, they are legally
considered funds belonging
to the QI, meaning that
your funds could be attacked
by creditors of the QI in
the event of a collection
action, or if the QI files
for bankruptcy. Your funds
could also be at risk if
legal or regulatory action
is taken against any of
the QI's other clients,
since there is no separation
of your funds from theirs.
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What
Makes an ExpertExchange
Different?
We
understand that the security
of your funds is your primary
concern. It’s ours
too. This is one of the
reasons we put each client’s
money in a separate
account.
The Experts
have always kept client
money in segregated accounts.
We believe it’s the
only way to protect your
1031 funds. As an added
security measure, we’ve
developed 1031Access®
so you can see the activity
in your account, in real
time, 24/7.
From expert1031.com, 1031Access
lets you see your specific
account directly at the
bank. You see what funds
have come into your account,
what has gone out, the interest
your funds have earned and
the current interest rate
the bank is paying you now.
You have true access, 24/7.
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A
commingled account also
makes it easier for a QI
to use your funds for its
own purposes. Dangerous
practices like investing
client funds for the QI's
personal benefit are not
unheard of (see the article
discussing an example of
this at 1031articles.com).
You are also at higher risk
of losing your funds to
accounting error or embezzlement.
Intermediaries
who commingle their clients
funds might claim they are
protected simply because
they have a degree, or have
passed some test. But how
will a law, accounting,
or some other degree protect
them from going bankrupt,
or getting sued?
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The
Good News About Segregated Accounts...
Funds
held in separate, or segregated
accounts are protected from the
risks listed above. Since your
funds are clearly traceable to
you, they are protected from attacks
of creditors or of a bankruptcy
estate. The likelihood of conversion
or embezzlement of your funds
is also drastically reduced.
This
is why we, The Experts,
proudly establish a segregated
account for every exchange we
do. We always have. It's more
work for us to do this, but it's
safer for you. And with 1031Access,
you can keep your eye on your
money and be sure your funds are
safe.
No
other QI in the 1031 industry
offers this kind of service, or
the peace of mind that comes with
it. That's why our clients are
saying that we are Setting
the standard for exchange security.
Go
to 1031articles.com
to read more about the dangers
of commingled accounts in the
February 18, 2004 edition of The
Colorado Real Estate Journal
in the column titled, "EXCHANGER
BEWARE..." by Gary Gorman.
Do
you have Acce$$?
Subscribe
to Access at expert1031.com so
you can monitor your exchange
funds online! A User ID and Password
will be sent to you via email
pending verification of your account.
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1031Access™
is an exclusive service of The
Experts and is not available with
any other exchange company. |
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