QUESTION: I’m self-employed and my business legal form is a C-corporation. After I adopt the Solo 401k by the 12/31 deadline, and then begin to invest my Solo 401k plan in real estate and trust deeds, are the assets held in my C-corporation name or in the Solo 401k providers name?
ANSWER: Pursuant to IRC 401(a)(1), the Solo 401k plan assets must be held in trust. A trust is a legal entity that is separate from your business and you as the Solo 401k plan trustee/participant. Therefore, when investing your Solo 401k plan in real estate and trust deeds, as well as any other investment, they must be registered in the name of the Solo 401k plan instead of your name or self-employed business name or Solo 401k providersname.
Lastly, the Solo 401k plan is administered by you as the trustee and are, therefore, responsible for maintaining, safeguarding and investing the Solo 401k funds. This is known as the exclusive benefit rule because it prohibits the business owner from diverting the Solo 401k plan assets for his own benefit.