Who manages the 1031 Exchange process?

Since 1991, IRC § 1031 has mandated the use of an impartial third party, known as a Qualified Intermediary (QI), to hold the proceeds from the sale of the Relinquished Property until the purchase of the Replacement Property is complete.

The Qualified Intermediary’s role extends beyond just holding funds during the exchange period. They also assist in structuring the exchange, preparing necessary documentation, and ensuring the process is compliant with both state and federal tax laws. Their guidance helps the taxpayer navigate the complexities of the exchange to ensure everything is executed correctly.

Although there are no federal regulations specifically governing Qualified Intermediaries, many states, with support from the Federation of Exchange Accommodators (FEA), have established state-level requirements to maintain high professional standards for those facilitating 1031 Exchanges. While these rules can vary by state, they generally include some combination of the following:

• Minimum bond and insurance requirements

• Registration and licensing mandates

• Restrictions on how exchange funds can be invested

• Requirements for qualified escrow or trust accounts to hold exchanger funds

• Authorization protocols for withdrawing funds

  
  

The success of any 1031 Exchange depends on the Qualified Intermediary’s expertise and attention to detail. 1031 Asset Solutions has over 20 years of experience to make sure your Exchange processes smoothly. Contact us at 844-401-1031.