How to Structure a Promissory Note Investment with 2 Trustees Solo 401k Plan


I still have a few questions on the logistics of how we will structure the purchase of a single promissory note pool for $100K in our self-directed Solo 401k with funds from our two separate solo 401k checking accounts. Will we need to have the seller split the note pool into separate parts to be purchased under different names and accounts? Please clarify how this process will work.


Good question. Because both business owners are participating in the self-directed solo 401k plan and both want to invest in notes, the promissory note investment can be structured in any of the following ways.

Option 1: One Note & Title is taken in both trustees name and the solo 401k plan name is listed

List both trustees as the beneficiaries/lenders on the same promissory note, and the deed if the note is secured by real estate.

For example, if Joe and Lucy Byrd are both participating in the Pine Trees Solo 401k Trust and each invest $50,000 of solo 401k funds in the same (one) promissory note, both will be listed on the same note investment and title is taken as follows: Joe Byd & Lucy Ford, Trustees of Pine Trees Solo 401k Trust

As a result, both Joe and Lucy sign the same note and the promissory note payments are divided 50/50 and flow to each of their respective solo 401k sub accounts. The borrower makes out two checks for each note payment—that is, a separate check is made out for each solo 401k sub account (one for Joe and the second for Lucy) and deposited into each respective solo 401k sub account.

Option 2: Tow Notes & Title is taken separately in each trustees name and the solo 401k plan name is listed

On the other hand, they can each process a separate promissory note investment from their respective solo 401k sub accounts, so each note is tilted as follows:

Promissory Note 1: Joe Byrd, Trustee of Pine Trees Solo 401k Trust

Promissory Note 2: Lucy Byrd, Trustee of Pine Trees Solo 401k Trust

Therefore, just like in option 2 above, the borrower writes two checks for each promissory note payment and the checks are deposited to each solo 401k owners respective sub accounts.

Click on solo 401k promissory note investment procedure for more information on making promissory note investments with a self-directed solo 401k.

About Mark Nolan

Each day I speak with energetic entrepreneurs looking to take the plunge into a new venture and small business owners eager to take control of their retirement savings. I am passionate about helping others find their financial independence. Having worked for over 20 years with some of the top retirement account custodian and insurance companies I have a deep and extensive knowledge of the complexities of self-directed 401ks and IRAs as well as retirement plan regulations. Learn more about Mark Nolan and My Solo 401k Financial >>


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