One way to add extra security to your 1031 exchange is to perfect a UCC security interest in both the account held by your FDIC insured bank and in the qualified escrow agreement itself. You can do this by filing a UCC-1 financing statement with the secretary of state where your 1031 monies are deposited.
That way in the unlikely event that your QI fails to perform, you’re not only a creditor, but you’re a “secured creditor”. If a problem were to occur, it is always much better to be a secured creditor, because secured creditors have first priority to get paid over all other unsecured creditors.
Make sure your FDIC insured bank acting as your qualified escrow agent consents to the security agreement in writing, otherwise you may not get a properly perfected security interest in the qualified escrow account.
Remember, when your exchange is over, you will need to file UCC-3 to terminate your security interest in the deposit account.
CPEC1031
At CPEC1031, we specialize in facilitating 1031 exchange transactions of real property. Our qualified intermediaries have over two decades of experience working with clients on their 1031 exchanges. We can help you through the like-kind exchange process and make sure all of your documents are in order, and that you completely understand the process every step of the way. Reach out to us today at our Minneapolis office or at one of our satellite offices across the United States.
Start Your 1031 Exchange: If you have questions about 1031 exchanges, feel free to call me at 612-643-1031.
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