transfer of funds from trust account to 401K account
My clients have a Family Trust account and Individual 401k accounts (aka I-401k, aka solo 401k). They would like to journal cash from the trust account into one of the I401k accounts. However, the custodian will not allow this. The basis reasoning is that the assets in the trust belong to the trust and not the individual or the business. So, a journal from the trust account “could” disqualify the I401k plan. The custodian has its own internal documentation on this but did not have something they could share with me in writing nor could we find anything specific in IRS Publication 560 to validate this point after a short search.
Stated another way, the issues is that contributions could not be made from personal trust accounts or DBO accounts because this could be deemed inappropriate and could disqualify the plan.
Can you find a ruling on this or any details to back this up?
Permalink Submitted by mk foss on Mon, 2014-09-29 21:05
Contributions to a 401k have to be made in cash. The deferral portion is made by the employee and the profit sharing portion by the employer. In this case the employee and the employer are the same individual. That’s the key – individual. You should take the funds out of the trust account so the individual can make contributions.