Self Directed Solo 401K Questions

[Pam Smith]

Hi, I am new to finding about self directed ira and self directed 401k recently from this forum and I have a few questions that I hope I can learn more before I making any decision.

1. Me and my husband have corporation (self employed) no employee. My husband also works as consultant. Can I or him both qualify to open up solo 401K?

2. I am hoping I would not need an LLC to do this, correct?

3. Can I be my own trustee starting out if I am very careful?

4. if not, what are best companies for trustee based on services and fees?

5. Can I buy land anywhere in US, other country in this situation?

6. Can I do joint investment with others if my 401k funds are not enough with my husband (disqualified or not?)

7. I have narrowed down the search to 5 companies, broad financial, sunwest, entrust , solo 401k and equity trust. Has anyone used any of these companies? If so, what do you recommend?

Thank you so much.

Pam

[Jeff S.]

Yes, you can be your own trustee and you don’t need to do this through a company such as Entrust. In this, case your 401K would be self-directed, you’ll have checkbook control, and you don’t need the LLc necessary for checkbook access to an IRA. There are several benefits to this:

a. You have complete control of the funds through a bank account.

b. You avoid the (substantial) costs a custodian such as Entrust or Sunwest charges. There are no per check, per investment, or asset value based fees. It’s completely your account and you’re in control.

c. You avoid the costs, tax returns, and bookkeeping associated with an LLc.

d. You can respond quickly to opportunities without the having to obtain permission from a custodian using their various form systems. If you ever had to purchase an REO or loan money quickly through a self-directed IRA at one of these firms, you know what I’m talking about.

There are also some drawbacks:
a. You might pay some nominal annual fee to the plan administrator who set you up in the first place. This enables them to keep your plan current and provide you with the latest plan documents.

b. You’re now the trustee and custodian and you must completely understand what you can and cannot invest in and with whom. One false move can cause the IRS to eliminate the plan and make you pay taxes and penalties on your entire retirement savings. By the way, the same is true for an SDIRA-LLc

c. You must be scrupulous with your records since you will not be receiving a monthly statement from anyone.

d. You'll need and EIN from the IRS and your CPA will have to create the reporting forms for you. I think this is form 5500-EZ for husband and wife plan. (You do have a CPA, don't you?)

These might seem harsh, but the rules are not difficult to learn and follow.

You can certainly merge your retirement funds and invest jointly as long as you keep the scrupulous records noted above. In this case, you have to know where and from whom all the funds came so that you can allocate their distribution upon retirement. By definition, the word “disqualified†in your question bothers me. You can’t do anything that’s disqualified.

Jeff