The short answer
No federal rule requires an attorney. Section 1031 and its regulations require a written exchange agreement with a qualified intermediary, a written identification and closings inside the deadlines; the intermediary supplies the exchange documents and your CPA reports the result. An attorney earns the fee where documents have to be written for your facts: contract clauses, title and entity questions, reverse and improvement structures, related-party deals and partnership splits. Legal fees are billed by the attorney, hourly or by the matter, and fees for the closings themselves are treated like other closing costs.
At a glance
| Federal requirement | None; the regulations require a written exchange agreement, not a lawyer |
|---|---|
| Your attorney as QI | Barred if they acted as your attorney in the prior 2 years, except on exchange work |
| Who drafts exchange papers | The intermediary: agreement, assignments, notices |
| Who reports the result | You and your preparer, on Form 8824 |
| Where a lawyer matters most | Reverse and improvement structures, entity changes, related parties, title defects |
| Closing attorneys | Some states use attorneys to conduct closings as a matter of law or custom |
| Fee | Set by the attorney; ask for a written engagement with scope and estimate |
The rules ask for a written agreement and written notices, not for counsel
Nothing in section 1031 or Reg. Section 1.1031(k)-1 names a lawyer. The intermediary safe harbor in paragraph (g)(4) requires a written exchange agreement that limits your access to the money, and paragraph (c) requires a signed identification delivered by day 45. Intermediaries supply standard forms for both.
The intermediary cannot advise you on taxes or law, which is the point of whether an exchange company gives tax advice. Your CPA computes boot and basis and prepares Form 8824. The question is whether anything in your deal falls outside those two roles.
Your own attorney cannot hold the money, but can review the papers
Paragraph (k)(2) treats a person who acted as your 'employee, attorney, accountant, investment banker or broker, or real estate agent or broker' within the 2 years before the first transfer as your agent, and an agent is a disqualified person who cannot be your intermediary. Work done only on section 1031 exchanges does not count. The details are in whether your attorney, CPA or agent can be your QI.
That leaves the attorney the reviewer's role: reading the exchange agreement before you sign, fitting the assignment into the purchase contracts, and making sure title is taken in the right name. A clause that lets you exit cleanly is the subject of the exchange cooperation clause.
Five situations where a lawyer pays for themselves
These are the deals where the documents are not off the shelf, and where an error is costly because the regulations offer no fix after the fact.
- Reverse and improvement exchanges: Rev. Proc. 2000-37 requires a qualified exchange accommodation agreement within five business days and permits guarantees, leases and loans between you and the titleholder that need drafting.
- Changing how you hold title, such as moving from a partnership to individual ownership or using an LLC; see the same-taxpayer rule.
- Related-party sales or purchases, which carry a two-year holding rule and reporting for the 2 years after the exchange.
- Title problems on the sale, including liens, easements and boundary issues; see a property with a tax or judgment lien.
- Co-owners who want different outcomes, where a partnership has to be divided before the sale.
What it costs depends on scope, and the closing portion is treated like other closing costs
Attorneys set their own fees, usually hourly or as a flat fee for a defined task, and they vary by state and complexity. Ask for an engagement letter that lists what is included: contract review, exchange agreement review, entity work, closing attendance. A review of a standard forward exchange is a smaller task than drafting a reverse exchange.
How the fee is paid matters for tax. Legal fees for conducting the sale or purchase that appear on the settlement statement are closing costs, and the Form 8824 instructions let exchange expenses reduce boot on line 15 and add to basis on line 18. Fees for tax planning or entity restructuring are not closing costs and should be billed separately and paid outside the exchange account.
Hypothetical: a forward exchange with a clean title and a single replacement may need only an hour or two of contract review, while a reverse exchange with a construction loan may need full drafting. Ask for an estimate for each piece, and run your own numbers with your CPA.
A DST replacement is bought with subscription documents, not a negotiated contract
If your replacement is an interest in a Delaware Statutory Trust, there is no deed, purchase contract or title negotiation on your side. You sign the offering's subscription agreement and the intermediary wires the funds. Rev. Rul. 2004-86 holds that a taxpayer may exchange real property for an interest in a trust of the kind described, if the other requirements of section 1031 are met.
The interest is a security, offered through a private placement memorandum, which is why it is sold through registered representatives; see whether a DST is a security and who can sell it. Many investors still ask an attorney or CPA to read the memorandum.
Related questions
Can my real estate attorney also be my qualified intermediary?
Not if they acted as your attorney on anything other than section 1031 exchanges within the 2 years before your sale. Reg. Section 1.1031(k)-1(k)(2) makes them a disqualified person.
Does the intermediary's exchange agreement replace a lawyer's review?
It replaces the drafting for a standard forward exchange. It does not tell you whether the agreement fits your contract, title or entity, and the intermediary cannot give that advice.
Do I need an attorney for the closing itself?
That depends on your state. Some states use attorneys to conduct real estate closings; your title or escrow company will tell you whether yours does.
Are attorney fees paid from exchange funds boot?
Closing-related fees that appear on the settlement statement are treated like other closing costs. Planning or entity fees should be paid separately from your own funds.
Is a CPA more important than an attorney?
They do different jobs. The CPA computes recognized gain and basis and files Form 8824; the attorney drafts and reviews the documents that make the exchange happen.
Sources
Checked against these publications on September 30, 2026. Rules and figures change; confirm the current version with your CPA or attorney before you act. This page is general information, not tax or legal advice.