In a 1031 exchange, you can’t touch the cash proceeds from the sale of the relinquished property. You can’t have actual or constructive receipt of the money. So an intermediary takes possession of the cash proceeds sort of like the synthetic seller. The intermediary becomes the seller of the property and hold onto the proceeds. Your intermediary can hold the proceeds in a separate, segregated bank escrow account to safeguard them. Furthermore, the bank can enter into a qualified escrow deposit agreement that specifies the bank can’t release the funds without the client’s written authorization. So while you can’t have direct control over the funds, you can have an indirect veto power over any disbursements out of the account to protect them from someone absconding with your funds or utilizing them in a way you don’t want.
Start Your 1031 Exchange: If you have questions about 1031 exchanges, feel free to call me at 612-643-1031.
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