1031 Exchanges – A Checklist

1. Select a Qualified Intermediary

A Qualified Intermediary, or QI, is an independent third party to the transaction whose function is to prepare the documents necessary to create the exchange, as well as to act as the independent escrow agent for the exchange funds. Because QI’s will be holding your funds it is important that you obtain a copy of their Fidelity Bond and insist that the funds are held in a segregated escrow account. Legal 1031 is always happy to provide a copy of our Fidelity Bond and let our clients interact with our depositing bank.

2. Choose your professionals

Legal 1031 is a great resource for information on §1031 exchanges. However, as a qualified intermediary we are unable to give tax or legal advice to exchangers. Therefore, it is important to have a tax and/or legal advisor who can work with Legal 1031 to give you the advice you may need. Retaining an attorney or accountant is not mandatory to complete an exchange, but it is recommended.

3. Make sure you have the proper language in your contract or purchase and sale agreement

Although it is not a requirement, it is good practice to modify your contract or purchase and sale agreement to reflect your §1031 exchange transaction. This language is commonly known as the “exchange cooperation clause addendum