When unforeseen life changes occur during the solo 401k plan owner’s life, he or she must be prepared and understand the federal and state rules which may impact the solo 401k owner’s retirement assets.

One of the most common retirement accounts for the self-employed in Connecticut is the solo 401k and it is often invested in real estate.

While not all solo 401k plans are protected from creditors; a solo 401k (also known as a self-directed 401k) for Connecticut residents is both protected from creditors [Conn.Gen. Stat Sec. 52-321(a)] and in bankruptcy [(the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005)].  For these two main reasons, the solo 401k has become the retirement plan of choice for residents in Connecticut who want to invest in alternative investments such as real estate, notes, metals, tax liens and even equities.

Common Questions & Answers Regarding Investing the Solo 401k in Connecticut Real Estate

Q 1: Does the solo 401k need to be registered with the Connecticut Secretary of State?

A: Good question, and no as solo 401k plans are not registered with the state even though they are also subject to Connecticut state law with respect to creditor protection.

Q 2: Do I need to file an annual Connecticut state tax return for my solo 401k plan?

A: No as a solo 401k plan is only required to file a Form 5500-ez once the total assets of the plan exceed $250,000 or if the plan is shut down and this return is filed with the IRS.

Q 3: How is title taken when I invest my solo 401k in Connecticut real estate?

A: Title is taken in your name and in the name of the solo 401k plan because you are the trustee of the solo 401k plan. For example, if your name is Sally Smith and the name of your solo 401k plan is Smith Solo 401k Trust, title to the property would be taken as follows:

Sally Smith Trustee of Smith Solo 401k Trust

For more information about how to invest a solo 401k in Connecticut real estate, CLICK HERE.