Self directed IRA, solo 401k

7 Replies

hello BP real estate geniuses! I could use some advice. A few months ago I bought a property that was mistakenly deeded to me instead of my retirement account. The closing attorney didn't ask who to deed the property to, just asked for my driver's license and assumed I'd be the grantor. Then a couple months later I happened to check the deed and found the mistake. The original grantor (the foreclosing bank) is happy to help and will resign a new deed, but the real estate attorney says this would be a problem as I'm already on record as the owner and it would cause title chain issues. Been going back and forth with the lawyer and the original grantor all day today. I was hoping a corrective deed would solve the problem but the lawyer thinks I'll have to re- deed it with myself as grantor to my retirement account as grantee, which looks fishy to the IRS. Anyway, I'm kicking around the idea of a land trust so the title chain would end with the trustee on the land trust instead of my retirement account but if anyone has any suggestions I'd love to hear them.... this can't be the first time this has ever happened. Worst case scenario I deed it from myself to my retirement account, as long as there's a record that no money changed hands and I didn't benefit from the transaction i think I'll be ok

sorry, the closing attorney assumed I'd be the grantee on the deed, not grantor 

@Debby Reed

For starters, I would suggest you contact your state bar about the title attorney.  That is some pretty sloppy work.

Is the IRA held by a custodian, or are you operating an IRA LLC / Solo 401(k)? The remedy may vary slightly depending.

I would put IRS compliance ahead of a clear chain of title, and would ensure that the title attorney produces and records the necessary documents to clarify the chain of title as an amendment to any new deed.

I would also get documentation from the title attorney regarding the error.  If the IRS did come asking questions about this, the 3rd party administrative mistake would be accepted as such, and you should not be at risk of a prohibited transaction.

@Debby Reed

Good question. Were IRA proceeds used form the onset to purchase the property? If not, then you cannot do what you are describing. If yes, then their might be a solution.

Thanks @Brian Eastman! It's a solo 401k, maybe damage control is easier since I'm the trustee of the plan? In the closing attorney's defense I should have been more vigilant at closing as far as how the deed was written... This was the first house I'd bought with the 401k... And the lawyer was cheap... You get what you pay for

@Debby Reed

There should not be much difficulty getting the deed re-recorded as "Debby Reed, Trustee, XYZ 401k plan". At least you do not have to jump though the hoops of a 3rd party IRA custodian.

Since the plan is a trust, it does not act on its own, but rather through the trustee.  Your name is on the deed anyway in your role as plan trustee.

The retirement assets were exclusively used for acquisition and rehab of the property to get it rent ready...very careful about not commingling funds.

Okay and good. Then the solution already provided is good and easy since it is a self-directed solo 401k.

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