Frequently Asked Questions

Below you will find the most commonly asked questions about our firm.  If you have further questions or need additiinal assistance please contact us at our offices at info@ksdrakelaw.com or by calling 919.570.1100. 

Please choose from the following questions to find the answers you are looking for. Simply click back to top to return to the menu.



Q: What Is A 1031 Exchange

Answer:

Tax free exchanges are defined by Section 1031 of the Internal Revenue Code. The code provides that no gain or loss will be recognized on the exchange of property held for productive use in a trade or business or for investment purposes. Exchanges allow investors to dispose of investment property without paying the capital gain tax that would normally be due. By deferring this tax, exchangers retain 100% of their equity to reinvest, providing more buying power and opportunities.

For property to be eligible as either relinquished property or replacement property in a 1031 exchange, it must be held by the exchanger for productive use in a trade or business or for investment purposes. Examples of eligible real property include:a) rental homes or apartments; b) raw land; c) farms; d) office buildings or condominiums; e) motels or hotels; f) industrial property; or even g) a thirty-year leasehold interest in real property.

Some property is ineligible as exchange property under Section 1031. Examples of ineligible exchange property include:a) stock in trade, inventory or other property held primarily for sale; b) stocks, bonds or notes; c) an interest in a partnership; d) a personal residence; e) a vacation or second home that is used by the taxpayer or his family for more than two weeks out of the year, or 10% of the actual number of days the property has been rented in a given year

The relinquished property and the replacement property must be "like-kind" to each other. For real property, the like-kind requirement is quite broad. One type of real property is like-kind to another as long as both are held by the exchanger for either investment purposes or productive use in a business or trade. For exchange purposes therefore , a farm may be like-kind to an office building. In a personal property exchange, properties are like-kind to each other only if they both fall within the same General Asset Class or the same Product Class as defined in the tax code.

Exchangers have until midnight of the 45th day after the transfer of the relinquished property to identify their replacement property.Up to 3 alternative replacement properties may be designated and the deadline for acquiring the replacement property is the earlier of 180 days after the relinquished property transfer, or the due date for the exchanger's tax return (including extensions) for the year in which the relinquished property was sold.

In order to completely defer payment of capital gains tax, the taxpayer must purchase property for a sales price equal or greater than the sale price of the relinquished property and all proceeds derived from the sale of the relinquished property must be used for the purchase of the replacement. Remember "equal or up in both equity and value".


Q: Why Do I Need Title Insurance?

Answer:

Title insurance is a way to protect yourself from financial loss in the event that problems develop regarding the rights to ownership of your property. There may be hidden title defects that even the most careful title search will not reveal. In addition to protection from financial loss, title insurance pays the cost of defending against any covered claim.

Any number of problems that remain undisclosed after even the most meticulous search of public records can make a title defective. These hidden "defects" are dangerous indeed because you may not learn of them for many months or years. Yet they could force you to spend substantial sums on a legal defense, and still result in the loss of your property.

The title insurance policy required by your lender only insures that the financial institution has a valid, enforceable lien on the property. An Owner's Policy is designed to protect you from title defects that existed prior to the issue date of your policy. Title troubles, such as improper estate proceedings or pending legal action, could put your equity at serious risk. If a valid claim is filed, in addition to financial loss up to the face amount of the policy, your owner's title policy covers the full cost of any legal defense of your title.


Q: What is A North Carolina Certified Paralegal?

Answer:

The work of paralegals is a very important part of a successful real estate closing . While lawyers bear the ultimate responsibility for representing clients’ legal interests, many of the behind-the-scenes tasks are accomplished by paralegals. Recognizing the critical role that paralegals play in our legal system, in 2005 the North Carolina State Bar, responsible for regulating the practice of law, established a program for the certification of paralegals.

The North Carolina paralegal certification model was developed by attorneys and paralegals as a voluntary program designed to ensure paralegal competency, and thereby elevate and provide consistency in the quality of the legal services they provide. The program assists in the development of paralegal professional standards, raises the overall profile of the paralegal profession, and sets a performance expectation that both the general public and legal professionals can refer to and rely upon. If a paralegal is a North Carolina Certified Paralegal, all involved in a closing can be assured that he/she has met or exceeded the skill and knowledge requirements established by the NC State Bar.

Under the provisions of this program, currently practicing paralegals may qualify for certification based on a combination of education and prior work experience – however, this qualification opportunity is only available to applicants until June 30, 2007. Effective July 3, 2007, all applicants will be required to have a paralegal degree from a qualified paralegal studies program, and will also be required to successfully pass the North Carolina Bar’s paralegal certification exam. Qualified paralegals must meet certain minimum education levels in order to become certified, and are required to undergo a minimum level of annual continuing education in order to maintain their certification.

Once a paralegal has become certified, he or she may use the following titles: North Carolina Certified Paralegal, North Carolina State Bar Certified Paralegal, Paralegal Certified by the North Carolina State Board of Paralegal Certification and/or NCCP.

Kathryn S. Drake, Attorney at Law, PA currently has three North Carolina Certified Paralegals. Bonnie Harward, Lisa Lewis and Susan Blevins.We are proud of the quality and professionalism exhibited by our paralegals, and salute those paralegals that have exerted the effort to validate their expertise by obtaining their certification.