Establish Solo 401k in San Diego CA

Establish Solo 401k in San Diego California | Methods of Investing Solo 401k in San Diego CA Real Estate | Self-Directed Solo 401k for California Real Estate

I have located two condos in downtown San Diego California and a house in Coronado California that I would like to purchase with my Solo 401k; however, E-TRADE, my current Solo 401k provider, told me that their Solo 401k does not permit investments outside stocks and mutual funds.

Do you know how I go about switching to a Solo 401k provider that will allow me, as the trustee of the Solo 401k plan, invest my Solo 401k in real estate including San Diego CA real estate and how the real estate purchase process would work within the Solo 401k?

You will need to open Solo 401k with a provider that will allow for Self-Directed Solo 401k, a type of 401k subject to the same rules as traditional 401k but, as the name implies, will allow you as the trustee to direct the plan in investments such as  real estate including San Diego California or Coronado California real estate.  

It is relatively easy and effortless to make the switch from E-TRADE to a self-directed Solo 401k provider  because you already have a Solo 401k plan established. You will simply need to notify your new Solo 401k provider to restate your existing solo 401k with E-TRADE. In turn the new solo 401k provider will prepare updated solo 401k prototype plan documents. You will next  open Solo 401k checking account at your local bank under the name of the Solo 401k and newly established EIN. However, you will need to take your newly drafter Self-Directed Solo 401k plan documents (Adoption Agreement and Trust Document) to your local bank branch in order to open solo 401k checking account. Once the checking account is open in the name of the Solo 401k, you will complete E-TRADE 401k transfer out forms. They can either wire the funds to the new solo 401k checking account or make check payable in the name of the Solo 401k fbo your name as the trustee (for example, if your new solo 401k plan’s name is Palm Trees Solo 401k, the check would be made payable to Palm Trees Solo 401k, John Doe, Trustee) and have it mailed to your business address as the trustee of the Solo 401k. After you deposit the check, you can begin investing in San Diego, CA real estate.

Lastly, click on Solo 401k Real Estate to learn about the process of investing in San Diego California real estate with Self-Directed Solo 401k.

Establish Solo 401k in Miami Florida

Establish Solo 401k in Miami Florida | Methods of Investing Solo 401k in Miami Florida Real Estate | Self-Directed Solo 401k for Florida Real Estate

I have finally reached the point where I no longer wish to continue to only invest my Solo 401k, which I opened at my local Fidelity branch here in Miami Florida, in just stocks and mutual funds. I’m ready to venture off and open Solo 401k with a solo 401k provider that will allow me to have access to checkbook control Solo 401k so that I can immediately start investing my solo 401k in Miami Florida real estate, especially now that prices are rapidly rising resulting from the influx of real estate investors from Brazil, Russia, and other emerging markets.  

The good news is that there are many Solo 401k providers that offer Solo 401k with checkbook control for investing in real estate, and various methods can be incorporated for investing your Solo 401k in Miami FL real estate, which are:

Method 1: Purchasing Miami Florida Real Estate with Self-Directed Solo 401k

Solo 401k invests in real estate directly. Specifically, the real estate purchase documents including the warranty deed is recorded in the Solo 401k plan’s name. Visit purchasing real estate to read detailed procedure on investing in real estate with Solo 401k.

Method 2: Purchasing Miami Florida Real Estate with Self-Directed Solo 401k

Solo 401k invests along with other investors in a private company (e.g., Miami Florida Real Estate Limited Partnership), with the limited partnership investing in real estate. Therefore the Solo 401k does not own the real estate directly but, instead, a portion of the Limited Partnership. Note that the Solo 401k cannot own 50% or more of the limited partnership in accordance with the Solo 401k prohibited transaction rules.  Visit investing in private placement with Solo 401k to view detailed procedure for investing in private placements with Solo 401k.

Establish Solo 401k in Dallas TX

Establish Solo 401k in Dallas TX | Invest Solo 401k in Dallas TX Real Estate Private Placement 

 

I live in Dallas TX and my current Solo 401k provider (Vanguard) won’t allow me to invest my Solo 401k in a Dallas TX real estate private placement (i.e., a Real Estate Limited Partnership). Do you know if such solo 401k investment is allowed and what type of Solo 401k Provider I would need to transfer my Vanguard Solo 401k to in order to open Solo 401k containing option to invest in the Dallas TX real estate limited partnership?

Solo 401k can be invested in a variety of investments including private placements; therefore, as long as you open a Self-Directed Solo 401k with an administrator or provider whose Solo 401k document allows for investing in alternative interments such as the proposed Dallas TX real estate limited partnership, you next need to familiarize yourself with the Solo 401k prohibited transaction rules.

Some of the specifics regarding the Solo 401k prohibited transaction rules that you need pay close attention mainly deal with making sure that your Solo 401k does not own 50% or more of the Dallas TX real estate limited partnership or, for the matter, any private placement type. Further, you cannot be the general partner of the limited partnership that your Solo 401k invests in because you are considered a disqualified party and are, therefore, prohibited from benefiting directly or indirectly from your Solo 401k plan’s investment in the Dallas TX real estate limited partnership. Put simply, only your Solo 401k can benefit from any investment not the plan’s trustee. Of course, you will ultimately benefit once you begin making Solo 401k distributions, usually at retirement.    

To learn more about how to invest Solo 401k in Private Placements including Dallas TX limited partnership, visit purchasing private shares procedure.

Yes both participants can borrow from same Solo 401k

Solo 401(k) Plan loan | Solo 401(k) loan maximum | Solo 401k and spouse

The Solo 401k loan rules allow for both Solo 401k participants to each borrow maximum Solo 401k loan amount of 50% up to $50,000 of their Solo 401k balance (this includes all assets). The solo 401k loan would be processed separately from each Solo 401k participant's solo 401k checking account. This means that if, for example, participant one (the husband for example) rolled over $60,000 from his IRA to fund his new checkbook control Solo 401k, he could borrow maximum amount of $30,000 which is 50% of $60,000. The same rule would apply to his wife. For example, if wife rolled over $80,000 from her Schwab IRA to her new checkbook control Solo 401k, she could then borrow through a participant loan maximum amount of $40,000. Note that both loans would be processed form the same Solo 401k; however, just separately from each solo 401k participant's checking account as each solo 401k participant's contributions including rollovers are required to be separately accounted for.

Lastly, not all Solo 401k providers allow for Solo 401k loan. Therefore, you may want to make sure you open solo 401k with a provider that offers checkbook control feature so that you can trustee and administer your own Self-Directed Solo 401k and thus add solo 401k loan option.

Establish Solo 401k in Chicago IL

Establish Solo 401k in Chicago IL | Loan Solo 401k to Brother in Chicago IL | Chicago IL Solo 401k

 

I live in Chicago IL, and Vanguard has been my Solo 401k provider for the past 6 years. However, I would like to open Solo 401k with a provider that will let me direct my own investments in something other than stocks and mutual funds. For instance, I would like to grow my Solo 401k while at the same time helping my brother to gain access to capital for purchasing rental properties in Chicago Illinois while the home prices are still low. Do you know if investing my Solo 401k in my brother’s LLC, which invests in rentals homes, would be an allowable investment with regard to the Solo 401k laws? My brother would own 95% of the LLC and my Solo 401k the remaining 5%.

The proposed investment would not be considered a prohibited transaction by your Solo 401k. Reason being, your brother is not a disqualified party for Solo 401k investing purposes because he is not your lineal descendant. However, if he is providing services to your Solo 401k, such as helping you administer the plan than he would be considered a disqualified party.   

Nonetheless, if you decide to proceed with investing your Solo 401k in Chicago IL rental properties through your brother’s LLC, make sure that the Solo 401k benefits according to percentage of ownership in the LLC. That said, if the Solo 401k owns 5% of the LLC, then 5% of the LLC profits should flow back to the Solo 401k as investment gains.

Further, be aware that the prohibited transaction rules prohibited Solo 401k from investing in an investment whose primary purpose is to benefit a party other than the Solo 401k--whether a friend, total stranger, or qualified party (e.g., your sister, brother, aunt, uncle, cousins, etc.) --rather than your Solo 401k. In other words, the primary purpose of any self-directed solo 401k investment must be intended for the growth of the Solo 401k not to help your brother purchase rentals in Chicago IL or even overseas such as Mexico.

If the IRS rules that a party other than the self-directed solo 401k received an unwarranted benefit, it could very well rule that your Solo 401k has participated in a prohibited transaction. Even though you may have good intention to help out your brother, the details of the transaction should not reflect that this was your primary objective over and above participating in a favorable investment for the self-directed solo 401k.

Establish Solo 401k in Phoenix AZ

Establish Solo 401k in Phoenix AZ | Loan Solo 401k to Sister in Phoenix Arizona | Phoenix AZ Solo 401k

 

After I Open Solo 401k, I plan to loan my solo 401k through a trust deed investment to my sister who lives in Phoenix Arizona so that she can buy her own personal house before the Phoenix AZ  market heats up, as I have read a lot of foreign investors are buying up Phoenix AZ real estate with all cash. The trust deed investment will be secured in firs position by my sister’s house. However, I want to be careful before I proceed with this transaction so as to make sure I don’t engage in a prohibited transaction with my Solo 401k by investing it in a trust deed to my sister.  I called Fidelity, my current Solo 401k provider, and they told me that they don’t offer this type of service but that they have heard of such transaction.  

Under the Solo 401k laws pertaining to prohibited transactions and disqualified parties, the proposed trust deed investment by your Solo 401k to your sister does not, on the surface, appear to violate the prohibited transaction rules since your sister is not a disqualified party.

However, please note that the prohibited transaction rules prohibited  Solo 401k to invest in  an investment whose primary purpose is to benefit another party--whether a friend, total stranger, or qualified party (e.g., your sister, brother, aunt, uncle, cousins, etc.) --rather than your Solo 401k.

Specifically, the primary purpose of any Solo 401k investment must be intended for the growth of the Solo 401k not to help your sister purchase a house in Phoenix AZ or in Costa Rica.

If the IRS rules that a party other than the Solo 401k received an unwarranted benefit, it will most likely rule that your Solo 401k has engaged in a prohibited transaction. For instance, if you loan your sister your Solo 401k funds through a promissory note investment secured by real estate but only charge 1% interest when the market rate for this type of loan is 5%, the IRS could very well rule the investment as prohibited. Even though you may have good intention to help out your sister, the details of the transaction should not reflect that this was your primary objective over and above participating in a favorable investment for the Solo 401k.

Precious Metals Solo 401k, Solo 401k Precious Metals, Disallowed Precious Metals in Solo 401k

Precious Metals Solo 401k | Solo 401k Precious Metals | Disallowed Precious Metals in Solo 401k  

 Assuming you have proceeded to open Solo 401k with a Solo 401k provider whose Solo 401k document allows for investing in precious metals (e.g., gold, platinum, silver, and palladium) and names you as the trustee of the Solo 401k, you will be able to take physical possession of the coins but not the bullion (bars).

Allowable Precious Metals in Solo 401k

Often used to hedge against inflation, the following precious metals can be purchased with Solo 401k:

• Gold, Platinum, Silver and Palladium: as long fineness equals or exceeds the minimum fineness of 995 parts per 1,000.
• IRC Section 408(m)(3)(B) defines the bullion standard
• IRC Section 408(m)(3)(A) references allowable types of coins

Before proceeding to invest Solo 401k in precious metals, make sure you first understand which ones satisfy the quality requirements. A number of gold coins issued by governments worldwide meet the fineness standard; however, the following do not and are therefore disallowed: Belgian 20 Franc, British Britannia, Franc 20 French, Austrian 100, 20 and Corona. For a full list of disallowed precious metals visit DisallowedSolo 401k Precious Metals. If a Solo 401 invests in disallowed Precious metals, it will be deemed a prohibited investment and an immediate taxable distribution.

Storing the Solo 401k Precious Metals

As section 408(m) (3) indicates, precious Metals in bar form including gold, silver, platinum and palladium must be safe kept by a qualified trustee or custodian.

However, if Solo 401k trustee is the business owner, he or she has option of storing metal coins (not the gold bars, for example) in a safety deposit box. Full list of allowable coins can be found by visiting allowable coin investments.

Precious Metals Solo 401k is the same as a Solo 401k

So as long as the Solo 401k provider composes plan documents that specifically allow Solo 401k to invests/buys acceptable coins or bars, Precious Metals Solo 401k is the same as any other Solo 401k with respect to the solo 401k laws and distribution rules, for example. Lastly, precious metals are easy to value since their fair market value can be ascertained by reviewing the daily metal prices. This is important especially if you later decide to convert your Solo 401k to precious metals Roth Solo 401k, annual Form 5500-EZ reporting and when it’s time to commence making Solo 401k distributions.

What is a Self Directed Solo 401k ?

What is a Self-Directed Solo 401k? | Solo 401k | Self 401k

Neither The Solo 401k provider nor its attorney/lawyer approves the Self-Directed Solo 401k. Instead, all 401k plans including Self-Directed Solo 401k are approved by the IRS through the issuance of an approval plan letter. In other words, Self-directed Solo 401k is simply another name used to refer to a 401k for the owner-only business.

Furthermore, the term self-directed solo 401k is commonly used in the retirement account industry to refer to a Solo 401k that can be invested in alternative investments such as precious metals (gold, silver), real estate, notes, businesses, tax liens, etc.

What's more, a self-directed Solo 401k comes with a checkbook control feature commonly referred to as 401k checkbook control because it allows the Solo 401k trustee to place investments by writing checks from the Solo 401k checking account.

However, only certain Solo 401k providers allow for checkbook control, and firms like Fidelity, Schwab, TD Ameritrade, and  E-Trade do not allow for it through the use of their Individual 401k documents, but will allow it through the use of a Solo 401k provider's documents.  Therefore, make sure to Open Solo 401k with a Solo 401k  provider that can assist you in establishing brokerage account at Fidelity, Charles Schwab, TD Ameritrade or E-Trade with checkbook control if you are still wanting to invest in equities in addition to alternative investments.  

All other features that apply to Solo 401k also apply to self-directed Solo 401k.

• For the self-employed with not full time employees;
• Annual contributions include profit sharing and employer contributions;
•  Contribution limit is $50,000 for 2012 plus catch-up amount of $5,500 for those age 50 or older ) totaling $55,500;
• If self-employed (part-time or full-time) you can contribute to Self–Directed Solo 401k as well as your full-time day job 401k. However, you cannot exceed the annual $50,000 contribution limit between both plans for 2012, for example;
• You can borrow-take a loan (Solo 401k Loan); up to 50% of account value not  to exceed $50,000;
• Self-Directed Solo 401k requires adopted in writing (e.g., prototype plan);
• The business owner is generally the named trustee of  his Self-Directed Solo 401k plan;
• Annual Form 5500-EZ is filed yearly after account exceeds $250,000 in value;
• Final 5500-EZ is also filed when Self-Directed Solo 401k is closed;
• Any business type can open self-directed Solo 401k—for example, LLC, Sole Proprietorship, S-Corporation, C-Corporation, LP, Partnership as long as you are self-employed with no full time employees.

Switch Solo 401k Providers | Real Estate Solo 401k Providers | Individual 401k Provider | Self Directed Solo 401k Providers | www.mysolo401k.net

Switch Solo 401k Providers | Real Estate Solo 401k Providers | Individual 401k Provider | Self Directed Solo 401k Providers | www.mysolo401k.net

While you generally want to stick with your current Solo 401k provider for the life the Solo 401k plan, there are good reasons to change Solo 401k providers, such as:

• The current Solo 401k provider does not offer 401k checkbook control
• The current Solo 401k provider (e.g., Vanguard, Fidelity, TD Ameritrade, E-Trade and Schwab) does not permit investments in alternative investments (e.g., real estate, precious metals, Notes, tax liens, etc.)
• The current  Solo 401k provider charges high/hidden Solo 401k or investment fees
• The current Solo 401k provider does not permit Solo 401k Loan

Nonetheless, however unhappy you are with your current Individual 401k provider, don’t rush out to Open Solo 401k with just any Solo 401k provider as other Solo 401k providers may restrict you from investing in alternative investments, making Solo 401k loan and may charge hidden fees.  

After determining which Solo 401k provider to switch to (restate Individual 401k to Solo 401k), below are the required steps:

1) A final Form 5500-Z does not apply

2)  Reason being, the new Self-DirectedSolo 401k provider will simply restate the existing Individual 401k plan during the plan document drafting process

3) The new solo 401k provider will ask for copy of your previous Individual 401k Adoption Agreement to ascertain the initial plan effective date as well as name of the plan. You new Solo 401k provider will then list these two items on the new solo 401k adoption agreement in addition to the new restatement effective date.

4) Provided the current Individual 401k provider is Fidelity, Charles Schwab or TD Ameritrade, check with your new Solo 401k provider as they should be able to assist you in opening brokerage account at one of these firms with checkbook control. This will allow you to continue to invest in stock and mutual funds while at the same time gaining options to take Solo 401k loan and making alternative investment purchases by writing a check.

To learn more about changing your Individual 401k to Solo 401k visit following links:

Fidelity Solo 401k

Ameritrade Solo 401k

Charles Schwab Solo 401k

Who is Disqualified From Making Transactions With Your Solo 401k

Solo 401k | Disqualified Persons | Solo 401k Disqualified Parties

You can loan money from your Solo 401k to certain relatives and make Solo 401k investments that include relatives.

For example, Internal Revenue Code Section 4975, paragraph (c) (1) details that you cannot make qualified plan (e.g., Solo 401k) or IRA transactions with your "spouse, ancestors, lineal descendants, and spouses of lieneal descendants." It goes on to detail that this rule also applies to anyone involved in the administration of the plan--for example, your investment advisor, CPA, Attorney, Solo 401k provider, etc.

You cannot make any Solo 401k investments with:

1. your husband or wife;
2. anyone in the bloodline directly above or below you, such as:

• your natural parents
• your natural grandparents
• your natural children and their spouses 

Further, you can't proceed in making Solo 401k investments with your adoptive children. Lastly, as explained above, you cannot make Solo 401k investments with anyone providing services to your Solo 401k Plan as well as their spouse or blood relatives.

However, you can make Solo 401k investments with:

1. your brothers and sisters
2. your spouse's brothers and sisters
3. your spouses parents
4. your spouse's grandparents
5. your grandparent's spouse (if not your natural grandparent)
6. your stepchildren
7. your spouse's stepchildren
8. your aunts and uncles
9. your cousins