Understanding the reasons people place assets in a blind trust
  1. Home
  2.  | 
  3. Uncategorized
  4.  | Understanding the reasons people place assets in a blind trust

Understanding the reasons people place assets in a blind trust

On Behalf of | May 13, 2021 | Uncategorized |

Many people associate blind trusts with elected officials who want to assure constituents that their decisions aren’t being made to enrich themselves or their families or that there’s any real or perceived conflict of interest. An independent third-party trustee, often an institution, manages the trust without any communication with the trust grantor or any beneficiaries.

A blind trust can be revocable or irrevocable. For example, a U.S. president may place their investments in a revocable blind trust for the length of their time in office. 

A corporate executive whose actions can impact their company’s stock may place all of their stock in a blind trust so that they can’t buy or sell it based on any inside knowledge or actions they might take that would affect the price.

Why use a blind trust if you receive a large sum of money?

Sometimes people use blind trusts when they’ve gotten a sudden windfall. They may want to keep it private and not be persuaded or tempted to spend or share the money. 

Lottery mega-winners sometimes use them. If you sold your tiny company for hundreds of millions of dollars, received a huge settlement in a lawsuit or inherited a substantial amount of money, a blind trust can protect all or part of that money from friends, relatives, old high school buddies or others hoping you’ll share some of your good fortune with them.

Blind trusts need to be carefully considered and established

Setting up a blind trust requires compliance with both state and federal laws as well as other possible requirements if you’re establishing it to avoid a conflict of interest. 

Choosing the trustee is especially important. You need a trustee who will wisely manage the money and help it grow. The further removed you are from that person, the better. That’s why putting it in the hands of a trust department at a financial institution is a common choice.

It takes an experienced attorney to help you establish a blind trust that will meet your needs and protect your money. Choosing that attorney should be one of your first steps as you consider a blind trust.