Longboat Retirement Solutions LLC

Your Trustee-to-Trustee Transfer November 12, 2012

Filed under: Uncategorized — larsfforsberg @ 2:27 am
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During the process of setting up your self administered, custodian free Solo 401k, you will at some point want to transfer the funds from your old custodian to your new retirement account.

Beware of your previous custodian’s potential errors when requesting your “trustee-to-trustee transfer” after you establish your trust account for your new retirement vehicle.

A trustee-to-trustee-transfers occurs when the current custodian of your retirement funds transfers the funds to the new custodian (you).

Within the retirement industry, the term trustee-to-trustee-transfer is usually used to refer to a transfer, where the assets are moved nonreportably between accounts of the same type.

The trustee-to-trustee transfer is a nonreportable transaction, which means that no 1099-R or 5498s are issued for the transaction.

Trustee-to-trustee transfers between accounts can occur for an unlimited number of times during any period.

Individuals who opt to have a check sent to them should exercise extreme caution when the check is requested.

Check to make sure that any paperwork completed is a ‘transfer’ request and not a distribution request.

Make it clear to the issuer that a 1099-R should NOT be issued for the amount.

Ask the issuer for a letter or some other confirmation that the transaction is a nonreportable transfer, and provide it to the receiving financial institution.

Get confirmation from the receiving financial institution will deposit it as a nonreportable transaction, and ask for assurance that they will not issue a 5498 for the amount.

It is fairly common for your previous custodian to be confused as to what is occurring.  You may have to clarify your intentions repeatedly.  Clearly state that this is a trustee-to-trustee transfer, not a distribution.

Occasionally clients have had to request a supervisor, or someone who is more knowledgeable on the subject of transfer requests.

Fear not, you’ll get beyond this bump in the road.  The short-term frustrations of dealing with large financial institutions that stifle transactions, are just that, short term.  Soon you’ll be able to brush the layers of roadblocks to the side and transact for yourself on your own schedule.


What is a Solo 401k? May 26, 2012

A Solo 401k is a retirement savings plan designed for self employed individuals.

Solo 401k Advantages

A Solo 401k plan possesses most of the characteristics of the Self Directed IRA LLC, including having the ability to invest in anything the law allows, but without the need to establish an LLC. It’s the most tax-advantaged, self employed plan available with very high annual contribution limits. You can set up this plan even if you’re employed at a full-time job. And, you can borrow funds from the account.

3 Simple Steps

Is setting up a Solo 401k a difficult?  No.  Longboat has made the process simple and quick.

  • STEP 1: Solo 401k documents are produced by Longboat and delivered to you.
  • STEP 2: You establish a local bank account to receive existing funds or contributions.
  • STEP 3: As Trustee, you determine best investment options and execute transactions.

Self Trustee

With a Solo 401k, you act as your own Trustee and are charged with investing trust assets prudently and productively. The Trustee cannot co-mingle personal funds with the trust and cannot enter into a transaction with the trust.


You can rollover funds from Traditional IRAs, SEP Plans, previous employer 401k plans, Money Purchase plans, Profit Sharing plans, Keogh plans, Defined Benefit plans, 403(b) plans and Rollover IRAs to initially fund your Solo 401k. You do this by setting up a Trust account for the Solo 401k and directly transferring the funds from the Custodian to the trust bank account.

Making Contributions

For the salary deferral portion in 2011, you can contribute the regular 401k maximum of $16,500 (with an an additional $5,500 if over the age of 50 at year end). And, you can add up to 25% of compensation for the profit-sharing portion. The combined maximum of these contributions can’t exceed $49,000, plus catch-up additions, if applicable. You could also set up a “designated Roth component”, if you desired.

Taking Out A Loan

Our Solo 401k plan document has a loan provision enabling you to take out a loan from your 401k. You can borrow up to 50% of the total 401k value up to a maximum of $50,000, tax free. Repayment of the loan is according to a loan amortization schedule created when the loan is initiated and must be paid back into the account (including interest). It is a simple process with no cost to you, through Longboat software, to create the loan documents.  Failure to make the loan payments may cause a loan default causing taxes and IRS penalties.

A Solo 401k is Not Subject to UDFI Tax

Income to an IRA associated with the financed portion of a property purchased using a non-recourse loan is subject to the Unrelated Debt Financed Income (UDFI) tax. UDFI is a type of unrelated business taxable income.  Solo 401k plans are exempt from this tax.