What is an IRA In-Kind Direct Rollover?

Knowing the IRA direct-rollover rules is the first step in IRA portability.

What is a direct rollover?

  • A direct rollover is the direct movement of  cash or assets from an IRA to a 401k including a solo 401k.
  • Direct movement means the IRA check is directly deposited to the solo 401k bank or brokerage account.
  • In the case of asset (e.g., real estate, cryptocurrency, or private placement), the asset is directly deposited to the solo 401k.
  • If funds are being directly rolled over, the IRA custodian will issue the check in the name of the receiving 401k or solo 401k. 
  • If an asset such as a private placement or real estate, for example, the IRA custodian will assign the investment to the new 401k including the solo 401k by preparing a paper assignment. 
  • Whether cash or an asset, IRA holdings are never deposited in your personal bank account under a direct-rollover. This means the IRA funds or asset is not first deposited to your personal bank account and then subsequently to your solo 401k.
  • The 60-day rollover rule does not apply.
  • The IRA custodian does not perform any tax withholding because there is no taxable distribution. 

What is an In-Kind Direct Rollover?

An in-kind direct rollover is the movement of an alternative asset (e.g., private placement, real estate, cryptocurrency, tax lien, and promissory  note) held in a self-directed IRA to a self-directed 401k such as a solo 401k plan. 

In order to prepare the document to assign the asset in-kind to the solo 401k, the IRA custodian will require written instructions. Some IRA custodians will require their IRA transfer-out form completed; others will require a  letter of acceptance, which the solo 401k plan provider prepares, and some will require both their transfer-out form and a letter of acceptance. 

In-Kind Direct Rollover of a Private Placement

A private placement is considered an alternative investment asset of a pretax IRA and may be directly rolled over to an eligible retirement plan such as a 401k including a self-directed solo 401k. 

The IRA custodian may require the private placement valued to properly report the value being directly rolled over to the 401k plan.

However, If the private placement is held in a Roth IRA or a nondeductible IRA it may not be directly rolled over to a 401k including a solo 401k plan. 

For SIMPLE IRAs, the private placement may be directly rolled over to a 401k including a solo 401k after a 2 year waiting period.

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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