Small Businesses Solo 401k – Is It Possible to Lend Money to My Brother?
It is possible for a small businesses Solo 401k plan to become a lender and issue private loans. However, Solo 401k rules stated that it is a prohibited transaction for a Solo 401k plan to lend money to a disqualified person.
However, many plan owners learn that siblings are not listed as a disqualified person to their Solo 401k plan. So is it possible for a Solo 401k plan to lend money to the plan owner’s siblings? In this Solo 401k Quick Tip video, Sense Financial discusses this question in details:
Can My Small Businesses Solo 401k Lend Money to My Brother?
Legally, a sibling is not a disqualified person. Therefore, you can use the money within your Solo 401k to make a private loan to your brother. Your Solo 401k can also partner with your sibling in a transaction, or rent a property to them. The IRS will not consider any of these a prohibited transaction.
However, lending to or doing business with a family member can get complicated. Remember, the point of having a small businesses Solo 401k is to help you save for your retirement. Treat all the investments from the Solo 401k very seriously and make sure the decision will make financial sense.