A Self Directed 401K, referred to after this as "one.K", is a 401K plan setup for your company. As the Manager of the company, you can act as the Trustee for the Plan's monies. This enables you to self direct investments on behalf of your 401K hence the term self directed 401K. The investments can be in real estate, other companies, or your own C-Corp. The use of this type of structure enables you to have investment and checkbook control over the 401K.
401K Plans do not permit direct ownership of real estate or other non-traditional investments in an 401K, so indirect investment via the self directed 401K (one.KSM) is the only choice.
When a (one.KSM) (Self Directed 401K) sells real estate or other investments, the capital gains are deferred through the 401K, like any other 401K investment. The headaches of 1031 exchanges are never necessary.
Ownership of the property in a one.K allows you, as manager, to have direct, hands-on control of and investment decisions over one.K assets, including control of the checkbook. Custodian involvement and hassles are eliminated, regardless of whether the investments are in securities, real estate or other assets.
A one.K can use its 401K funding as a down payment for a real estate purchase, with the one.K financing or borrowing the balance. The use of debt financing for real estate is not subject to UBIT tax.
Since you control and handle all one.K transactions, and act as the "custodian", then there are no expensive annual fees.
Litigation threats which accompany investments such as real estate are substantially reduced. This is done by isolating the investment inside a title holding company or Trust holding company, and away from the rest of your 401K funds and estate.
Continues to provide deferral of income and gains inside the 401K.
If the company sponsoring the plan generates income, then you can make contributions of up to $44,000 annually to the 401K plan ($15K for employee and $29K for employer for the year 2006)
How does the Self Directed 401K work?
Create Entity (LLC or C-Corp). NAFEP will create the entity with the appropriate state.
Create the Plan (Trust with Plan documents). NAFEP will create the Plan and file with the IRS.
Rollover monies from IRA or 401K to your one.K.
Setup Checking Accounts for the Company and the Plan.
Direct Investments by purchasing membership or stock in a company (your C-Corp or another entity).
Self Directed 401K Strategies:
Purchase real estate
Loan to yourself or others
Buying or starting a business
Use purchase options on real estate
Flip properties
License intellectual properties
What Your Plan Comes With
Setup of C-Corp
Filing of state articles by NAFEP
Filing for Corp EIN with IRS by NAFEP
C-Corp bylaws
Setup and operating guide
Stock certificates
Meeting Records (initial and annual)
Banking authorizations for checking account
Creation of 401K plan documents
Filing of 401K EIN
Favorable determination letter from IRS
Complete set of plan documents with all necessary forms and guides
Assistance and guidance in the rollover of current plan to new self directed plan
Assistance and guidance in setup of checking account or use our partner Chase Bank
Unlimited pre and post setup consulting for plan setup and operation
Click here to see what is included in the Self Directed 401K (one.KSM) Package
