Federal and state rules may impact the solo 401k owner’s retirement assets.

The most common retirement account for the self-employed in the state of Texas is the solo 401k plan which is commonly invested in Texas real estate.

While not all solo 401k plans are protected from creditors; a solo 401k (also known as a self-directed 401k) for Texas state residents is both protected from creditors [Tex. Prop. Code Sec. 42.0021] 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 the state of Texas 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 Texas Real Estate

Q 1: Does the solo 401k need to be registered with the Texas 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 Texas state law with respect to creditor protection.

Q 2: Do I need to file an annual Texas 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 Texas 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 Mike Sanders and the name of your solo 401k plan is Tigers Solo 401k Trust, title to the property would be taken as follows:

Mike Sanders, Trustee of Tigers Solo 401k Trust

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