"Keogh"/H.R.10 Plans - Can they self-trustee now?

[ljr]

At one time, self-employed persons could not trustee their own qualified plans unless they were incorporated. They couldn't borrow, etc. When the most recent round of changes made these plans essentially the same as qualified plans esablished by corporate entities, did they also allow the self-employed individual to serve as trustee of his/her own qualified plan? Site? Thank you!!!!!!!!!!!

[rcline46]

First, I love seeing references to 'Keogh/HR 10' plans, since they have not existed since TEFRA in 1983 - after 20 years one would think the terminology would go away!

Second, there is no cite that self-employeds can or cannot trustee their own plans. And since there is no cite then there is no prohibition. There only requirement is that a trustee must be a US 'person'.

[Guest jfp]

I don't recall if there is a cite, but the problem is that under 401(a) the trust must be a "good" trust under local law, and generally speaking a trust does not exist under local law if the settlor, trustee and sole beneficiary are the same person. That is the situation you'd have in a one-person plan where the sole participant is an unincorporated sole proprietor.

[mbozek]

While IRS pub 570 ( P12) does not restrict who can be the trustee of an HR-10 plan, the obvious question is why would a SE person want to incur the cost of preparing a trust document as well as the headache of being a trustee, including obtaining a TIN #, etc. when there are many vendors who will provide a pre approved plan and trust for free or at a nominal cost of $30 a year?

[Larry M]

"Self-trustee" status gives an individual more control over assets and plan design than the package plans provided by most institutional vendors. In addition, the institutionalized plan usually may have language which could require the client to cover his household employees, inappropriately affect any other plans, etc.

If there is enough money in the plan to keep the plan going, then there is enough reason to pay more than $40 per year for good advice.

If you are looking for inexpensive maintenance, the Keogh plan may be better off, from a reporting and revising aspect, to be converted into an IRA. This may eliminate some creditor protection, may require some assets to be sold or eliminated and requires spousal consent.

Again, these are valuable assets and any decision concerning their handling should be made with competent counsel.

[mbozek]

Restricting investments to securities traded on a national exchange and mutual funds is not a bad thing because it prevents investors from poor investments such as privately held securites, foreign investments,collectibles and RE. If the language in a plan document is not appropriate then select another vendor. Finally the institutional trustees/custodians provide systemized procedures for routine administrative functions/recordkeeping that a trust must observe. The employer can always hire an outside investment advisor to manage investments