Since a self-directed solo 401(k) plan is for owner-only businesses, we frequently see husband and wife-owned businesses sponsor the plan so that each can have separate accounts. Due to spouses often wanting to go in on investments with each other, the question of their accounts being allowed to co-invest in real estate comes up from time to time.
Assuming that the spouses are seeking to buy real estate from an unrelated person and will not be engaging in a prohibited transaction, using both of their accounts, it is probably allowable.
When it comes time to buy the real estate investment property, it will need to be titled in the name of the plan, not their individual names, and using the plan’s EIN. Then, the funds to purchase the property will flow from each of their respective accounts, meaning, each person would write a check or wire the funds from their own accounts to the title/escrow company for the amount that would be their portion (1/2 and 1/2; 1/3 and 2/3, etc.)
For easier administration, it would be allowable for the rental income and expenses to flow in and out of only one of the accounts provided that there is a reconciliation to allocate income and expenses between the two accounts in accordance with each person’s respective investment amount in the purchase. For example, if 1/3 of the funds to purchase the property came from one account then this same account would be entitled to and responsible for 1/3 of the income and expenses.
It is highly recommended that a reconciliation be performed at least annually but also prior to any distributions or transfers out of either of the accounts.
