Rolling over from a self-directed IRA to the Solo 401k is a fairly straightforward process, but you'll want to work with your current IRA custodian to ensure the process goes smoothly.
Each custodian's process varies slightly. We've included some best practices recommended from well-known custodians below:
Way #1: Initiate transfer/distribution from IRA custodian
Contact your IRA custodian and request a distribution form (make sure you let the custodian know you are doing an "in-kind transfer" to Qualified Retirement Plan so it's not a taxable distribution). Complete and return the distribution form to the IRA custodian.
Complete a fair market valuation form. Usually your IRA custodian will have this form readily available for you. Typically, the custodian will request a full appraisal of the property. Often, you may select a property appraiser of your choosing. The IRA custodian wants this valuation so they can correctly complete 1099-R (documenting the rollover) where they can detail how much the asset is worth.
Work with your attorney or title company to create a grant deed. The deed will grant ownership from the IRA to the Solo 401k trust.
Send the entire packet (completed distribution form, fair market valuation form, rollover request [if required], prepared grant deed). The IRA custodian will sign the distribution form and grant deed effectively transferring the property into the Solo 401k trust.
Way #2: Initiate in-kind transfer from Solo 401k
Complete a rollover request on your 401k dashboard including the asset in the "in-kind" transfer section.
Get a fair market value appraisal on your property from a real estate agent
Work with your attorney or title company to create a grant deed. The deed will grant ownership from the IRA to the Solo 401k trust.
Send the entire packet (401k rollover packet with in-kind asset transfer instructions, fair market valuation, and prepared grant deed). The IRA custodian will sign the distribution form and grant deed effectively transferring the property into the Solo 401k trust.
You can create the in-kind transfer document on your Solo 401k dashboard. Complete the section at the bottom, titled, "Assets In Kind"
You'll list the address of the property in "name of asset". The type of asset is generally "real estate investment property" and list the most recent valuation of the property.
Your rollover packet will then include instructions to the IRA custodian the value and type of asset you are transferring:
Your IRA custodian has to report the movement of assets via form 1099-R. When you report the fair market value of your property, they'll have the correct dollar amount to put on the 1099-R of what is rolling from the IRA into the Solo 401k.
Your IRA custodian will prepare form 1099-R for you when they complete the rollover and if all goes as it should, it'll be a direct rollover with no taxable consequences.
Notes:
Grant deeds are instruments used to document the transfer of ownership from one party to another. There are generally two parties in a grant deed: the grantor (who's transferring the property), and the grantee (who's receiving the property). This document will typically need to be notarized.
In the case of transferring assets from the IRA to the Solo 401k, the IRA would be the grantor, and the Solo 401k trust would be the grantee. The properties should be re-titled and re-registered in the name of the Solo 401k trust to complete the re-assignment of ownership. After the grant deeds are prepared, proceed with the steps above.