No I’m not related to Dorothy, but have been in the real estate industry for 21 years. I know a lot of escrow title and exchange people and know Dorothy well. That doesn’t diminish what I’ve said because a fact is a fact. I would rather not attempt to re-explain. Until the IRS says you can control your funds in an exchange finding the safest way to defer taxes is everyone’s business. Thank you so much for the opportunity to speak.

Mattress? That’s a thought. Seriously with all you have said, it is still beyond the scope of any investor to wonder if the insurance company is truly going to cover a major life savings loss. The only true guarantee would be if each investor had complete control over his or her exchange, no middle man QI’s involved. In that case if you lose your own money you only have yourself to blame.

If I didn’t know any better or was a suspicious type, I would guess you are related to Dorothy or her business. Are you? The majority of people who have been ripped off in 1031 exchanges had far more than $250k at stake.

Insurance companies have proven to be less than ethical in many of the instances. Surety bonds may not cover every single incidence of crimminal actions–but only one. A per incidence coverage is absolutely necessary. In fact if you take into account how hard insurance companies fight individuals on the smallest of claims (ie proof, documentation, and other hoops to jump through,) I find it hard to believe that any insurance company is going to willingly and easily cover an investors $12. 4 million dollar loss like the one suffered by a Silicon Valley Ed Okun victim.

Until the IRS says you can control you own money in an exchange, it seems to me that Dorothy’s business model could serve as a regulatory outline on how a QI should operate, since no one is sitting around with an extra 200 million to play QI with. (If I had 200 million I’d be sitting on a beach somewhere with and umbrella in my drink) The way I understand it is her company’s Exchangers Trust Funds are held for the client the following way:
1. The money is in a U.S. Bank in individual accounts backed by FDIC insurance up to 250K
2. Any money over 250K has a surety bond issued for the rest for .25% less interest earned.
3. A bank statement is mail to the exchanger proving the money is there and even earning interest.
4. A notarized signature to release the funds for the replacement property per the client request.

Looks good so far

No one is currently guaranteeing your life savings, not matter where you have them. It seems we are only guaranteed death and taxes in this life. Even if you’ve stuffed your mattress with your life savings, a thief could break in and steal it.

I agree that there ought to be regulation imposed upon the industry. All qualified intermediaries should be compelled to treat the funds as we do.

I find it interesting that you would point out that a person with $200mil would not concern themselves with the day to day workings of a 1031 exchange. How do you think that person amassed $200mil? By giving it to the IRS?

Furthermore a bank does not remove a person’s funds from a bank account, checking account, or savings account. In the majority of the 1031 cases, if not all, the investor’s money is invested by the QI. How exactly is that secure?

Whether you love your job or find it “that interesting” the fact of the matter is people who could not afford to lose a small amount of money are losing their entire life savings in 1031 exchanges. These losses are being incurred by both crimminals like Ed Okun and McGhan but also what we always thought to be LEGITIMATE businesses with good reputations like LandAmerica.

Dorothy maybe your 1031 services are completely safe. Maybe Union Bank is completely safe. But those are not facts I would be willing to bet my life savings on at this time. The fact of the matter, for me and this is only my opinion, is I could not risk my retirement nest egg on anything less than guarantees. If a bank or QI is not willing to guarantee my money, I will wait on this investment vehicle until the government aka IRS decides to either abolish the industry all together or regulate it so well that there are no loop holes for people’s hard earned monies to escape.

The reality is that no guarantee is as safe as allowing me to handle my own money with no middle man.

When you deposit money in a bank, the bank, no matter how large, never matches your deposit dollar for dollar. There is not security such as that in this realm of existence. All you can do is find the strongest, most cash heavy bank you can. Further, a person with 200 million dollars in cash would not concern themselves with the day to day workings of acting as a qualified intermediary. I love my job, but it’s not THAT interesting.

It is possible to set up an exchange fund account so that Union Bank will not move it without the notorized signature of the exchanger. Thank you, Mr. Yacotiamo, for your brilliant suggestion. It would cause a delay in the funding due to the bank waiting to receive the original notorized signature from the exchanger, but lots of people would think it was worth it. Today I am altering our documents to allow our future clients to demand this additional security. Thanks again, Mr. Yacotiamo, for your assistance in making Haven Exchange the best.