Recently I was reading on Robert Kiyosaki’s RichDad.com Community Forum a question asked by a newbie seeking truth. None could answer, so I answered for him. I posted a copy of my message here hoping to benefit and inspire others who also seek it.

His question was: “For the purpose of holding title to investment real estate properties, when would a trust be more beneficial than a corporation?”

Later in the post someone asked him if he meant a Real Estate Investment Trust or REIT. He replied, “Well, I really don’t know the first thing about trusts, but I assume it’d be an REIT.” I had to laugh, and answer his question:

——-

no lol it’s not an REIT–its called a Land Trust.

Land Trusts protect property.
LLCs protect people.

An LLC can be a beneficiary of a Land Trust, thus protecting property AND people. This is the best configuration for a real estate investor.

If Robert Kiyosaki needs another million dollar book idea he should get Bill J. Gatten on his team of advisors and write a book with him about the Land Trust.

Furthermore, when you combine a Land Trust with a Triple Net lease to the tenant buyer as a beneficiary of the trust, magical things can happen. None can partition the property to satisfy judgments or creditors–not the seller, not the investor, not the tenant/buyer. None can lose the property as a result of a lawsuit, bankruptcy, or marital dispute–not the seller, not the investor, not the tenant/buyer. Landlords can convey tax benefits to the tenant buyer (namely the income tax deduction for paying mortgage interest and property taxes) None can attach a lien, or judgment, or otherwise cloud title to the property–not the seller, not the investor, not the tenant/buyer.

Only when the seller and/or investor and the tenant/buyer are in completely unanimous agreement can anything legally be done with the property. This is a blessing, not a curse.

Lease Options, Contract For Deeds, All-Inclusive Trust Deeds, Wrap-Around Mortgages, etc. all violate the lender’s Due on Sale clause, but there is no sale when the seller places their property into a Land Trust. Further, there is a legal exception allowed by the federal government that protects homeowners who place their property into a Land Trust from the Due on Sale clause–no lender can call it, regardless of whether their contract states it or not.

Likewise, these ‘other’ methods of creative real estate investment that are so popular today do not protect the property by themselves. For example, what would happen if an investor with 10 lease options were to file for bankruptcy, or if his wife were to fight for the cashflow in a marital dispute or divorce, or if he were to injure another in a automobile accident and be sued. What are the tenant/buyer’s rights?? They have none. The property would be taken to satisfy a judgment.

Further, what would happen if a tenant/buyer were to allow the water softner company to put a lien against their lease optioned property, and then not pay the bill? Or not pay the rent? What are the Landlord’s rights?? None. The house cannot be sold until the lien is satisfied.

Take heed. Many reputable attorneys are not specialized in the Land Trust. Very few even know what it is. Estate planning attorneys do not always recognize them, because they are not the every day type of trust. A Land Trust is a living revocable inter-vivos trust. Furthermore, the type of Land Trust I am speaking of is co-beneficiary directed, or more specifically known as the Equity-Holding Trust.

Do not let them tell you these are illegal where you live. They only want to sell you another lease option document. Research and you will find that they are legal in every state in the union without exception by virtue of the statue of uses (basically, they are legal because they are not specifically illegal).

I hope this has illuminated your confusion regarding the ‘trust’ used for real estate investment purposes.