Titling Real Estate in a Solo 401-k

[Mark Davidson]

I have funds in a 401-k plan from a former employer that I want to roll over to a solo 401-k; then, write a check to purchase an income producing property without financing. 

A desirable property just hit the market that has kicked this plan into high gear. 

Because there is little liability in the service business that qualifies me to utilize a Solo 401-k, I prefer to not incur the cost and maintenance of an LLC.

I've seen lots of examples of how property would be titled with a Solo 401-k with an LLC, but curious about a how folks title their property when it's just an individual person purchasing on behalf of their Solo-401-k. John Doe, trustee of the John Doe Solo 401-k? I'm drafting a purchase agreement.

[Brian Eastman]

@Mark Davidson

Typical!  Most employees of Merrill and much of the mainstream financial services industry are not at all trained on self-directed retirement plans and will say just about anything to get you to not move your money away from them.

When you setup a Solo 401(k), you are engaging a provider to create a legal entity for you in the form of a 401(k) retirement trust.  You will then establish a bank and/or brokerage account in the name of that trust with one or more entities of your choosing.  As the plan trustee, you are the only person with signing authority on that account.

When a rollover is executed it will be issued to the new plan and either delivered to you via check or wired to that account.  Your plan provider never handles your retirement savings.

Where you do need to be concerned is with respect to the proper operation of your Solo 401(k) in accordance with IRS rules.  A Solo 401(k) is not just "an account".  It is a qualified retirement plan with regulatory requirements for proper administration and reporting.  As you will be the plan administrator, you want to be sure you work with a provider that can help you do what is necessary.  it is fairly easy, but takes guidance.  Separately, there are IRS rules related to self-dealing and prohibited transactions when you invest with the plan.  Again, not rocket surgery, but where having a knowledgeable guide is imperative.

The bottom line is that you get full control and flexibility.  In exchange you take on some basic responsibilities for proper use of the plan.