Walnut Creek, CA · Member since 2012 · 1 post · 0 votes
Hi, I'm trying to figure out the proper way to vest title for a purchase of real estate within my self-directed 401k. Unlike an SD IRA there is no custodian; I am the employer (sole proprietorship) and trustee. The title company (in California) says vesting must include trustee names, so I want to make very sure that my involvement is represented clearly as a trustee, with no personal benefit or gain.
I've found specific wording examples for IRA's, but - oddly? - not for 401k's. Any suggestions on where I might find something about this, or even what type of attorney to consult about it? Thanks -
Most Individual(k) holders are the sole employee and business owner for the entity they're operating the plan under. Because they are the only individual under the plan, using their personal information as trustee isn't completely necessary.
Since you're being requested to include your name as trustee (which doesn't hurt anything), consider using the following titling:
Company Name 401k FBO (your full name) Trustee
It's important to include the 'Trustee' on the end when including your name to show your involvement under the plan.
I set up solo 401(k)'s for my real estate investors all the time. If you contact me, I can give you some suggestions on how to title the investment. Here is a little write up from our FAQ section
Put offer together / contract
When putting offer together, as trustee of Solo 401k Plan, make sure to list your Solo 401k as the buyer. Remember that your Solo 401k is a separate investor from you, and therefore its name needs listed on all purchasing documents. If purchasing under tenant-in-common, make sure to reflect the Solo 401k's purchase portion separately. The Solo 401k's title should read as follows for example:
ABC Solo 401k Trust FBO Jane Do, Trustee
IMPORTANT: The regulations prohibit the assignment of a contract first drawn up solely in the name of the Solo 401k's Trustee to the Solo 401k account.
make a deposit / earnest deposit
When your self-employed 401k purchases property, your Solo 401k is required to fund any necessary deposit or earnest funds.
Closing
At closing, you,as trustee of the Solo 401k, will approve and sign all documents and then submit them to the closing agent along with check for purchase.
Vesting of all documents
ABC Solo 401k Trust F.B.O. Jane Doe, Trustee
Purchases should be transacted under Solo 401k's EIN:11-1234567
The real problem comes when you are selling. It seems it is not possible to find a title agent that isn't thoroughly confused about what is required when you sell. You can't convince them that there shouldn't have been a Land Trust in place.