Self-Directed IRA vs Solo 401(k): Checkbook Control, Prohibited Transactions, and UBIT/UDFI Explained

📚 Unlock the secrets to building wealth! My book and 12-module Masterclass cover everything I’ve learned about passive investing and creating financial freedom. Watch it on-demand for FREE: http://thewealthelevator.com/master🤝 Join the Hui Deal Pipeline Club and get a one-on-one call with me to discuss your investment goals: https://thewealthelevator.com/clubSelf-Directed IRA vs Solo 401(k): Checkbook Control, Prohibited Transactions, and UBIT/UDFI ExplainedLane and John Park discuss how investors can use qualified retirement plan funds to invest in non-traditional assets like real estate and private equity through true self-directed structures, contrasting them with “self-directed” brokerage accounts that still limit investments. They compare self-directed IRAs (which require an IRS-approved custodian) with Solo 401(k)s (which allow the account holder to be the trustee), explaining checkbook control via IRA LLCs or IRA trusts, including why trusts can reduce recurring LLC fees in states like California. The conversation covers Solo 401(k) eligibility (legitimate self-employment with no employees other than a spouse), higher contribution limits, Roth options, participant loans, and the exemption from UDFI. They also review prohibited investments (life insurance and collectibles), disqualified persons rules, UBIT/UDFI tax concepts, deal-funding timelines, and investor Q&A including a real-world UBIT surprise from new-build profits.00:00 Intro to Self Direction01:00 Solo 401k Eligibility02:33 Why Big Brokers Fail06:38 Checkbook Control Basics09:13 IRA Trust Option11:03 Solo 401k Advantages13:13 SDIRA Setup and Funding13:54 Custodian vs Control20:46 Prohibited Assets Rules23:04 Disqualified Individuals25:28 UBIT and UDFI Taxes28:25 UDFI Real Estate Example31:26 Solo 401k Tax Exemption33:47 Solo 401k Setup Details36:18 Solo 401k Loan Feature37:00 Plan Rules vs IRS38:46 Contribution Limits Explained42:13 Loan Terms and Repayment43:28 Roth and Backdoor Strategies46:43 Paying Kids and Audits47:58 Punting Taxes with QRP51:02 Setup Timeline and Funding54:18 Checkbook Control Custodians58:25 When QRP Investing Makes Sense01:04:37 Retirement Tax Trap Parents01:06:26 Parents Money Risk Choices01:07:24 How Much to Retire01:08:54 Stop Overfunding 401k01:10:32 Back Into 4 Percent Rule01:13:47 Financial Independence Mindset01:14:53 Three Bucket Strategy01:16:51 Kids Inheritance Limits01:19:28 UBIT Surprise in Solo 401k01:21:29 Blocker Corps and AI Learning01:24:10 Finding the Right Tax Pro01:28:17 Trivia and Wrap UpConnect with me:LinkedIn: https://www.linkedin.com/in/lanekawaoka/Facebook: https://www.facebook.com/TheWealthElevatorInstagram: https://www.instagram.com/TheWealthElevatorLane Kawaoka is a developer and multi-family syndicator who owns 10,000+ rental units and is the leader of “Hui Deal Pipeline Club” which has acquired over $2.1 Billion AUM of real estate by syndicating over $200 Million Dollars of private equity and most importantly distributed more than $45M back to our investors since 2016. Check out our Top-50 Investing Podcast, The Wealth Elevator. Hosted on Acast. See acast.com/privacy for more information.