Enhanced Safety - Part Three

(Listen Here 2:59 min)

Even More Safeguards – Adding a UCC-1 Security Agreement

Want even more safety…Another way to add extra security 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, your not only a creditor, but a 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.

Here is a 1031 Tip: 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.

About the Author:

Jeff Peterson (AKA: "Professor 1031") is a Qualified Intermediary and Serves as an Adjunct-Professor for the William Mitchell College of Law (Where He Teaches About Federal Income Tax). Jeff Works With People From All Over the USA to Save Money on Federal Capital Gains Taxes.

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