In general, a trust is a fiduciary relationship that is created by a person (i.e., the “settlor” or “trustor”) that gives another person (i.e., the “trustee”) the right to control their property or assets for the benefit of third parties (i.e., the “beneficiaries”).
Basically, the purpose of a trust is to provide legal protection over the settlor’s assets and to ensure that they will be distributed to the proper beneficiaries and in accordance with the settlor’s directions. Among many other duties, the trustee is primarily responsible for overseeing all of these transactions and managing the trust.
There are many different kinds of trusts, such as a charitable trust, a land trust, or a blind trust. A blind trust is a type of trust that is arranged in a way so that its beneficiaries will have no knowledge about the property or assets contained in the trust.
Additionally, in a blind trust set-up, the trustees and those who hold power of attorney will be given all control over the trust. In other words, they are the ones in charge of making every decision for the trust and will have absolute knowledge about its contents.
Who Needs a Blind Trust?
The main reason that people opt to create blind trusts is specifically to keep their financial activity a secret. Sometimes, the contents of a trust may create conflicts of interest or issues for the trustee or the settlor.
For instance, a beneficiary may have an issue with how a trustee is investing the assets. A blind trust provides a way to minimize these disputes or the risk of potential disputes from occurring since it shields the beneficiaries from the trust holdings.
In addition, people who have high public visibility, such as politicians or celebrities, may also want to keep their assets and financial activity private. A blind trust allows them to do so. This type of trust can also help them prevent the public from examining their assets and reduces the possibility of conflict of interest claims. This function can be especially important when funds from the government are used in a private capacity.
A blind trust may also be a good option for when a person suddenly receives a sum of great wealth, such as if they win the lottery or inherit a large amount of money. Again, a blind trust can be used as a protective measure to provide the person a means of privacy and anonymity. It will also help them keep their personal information secret from the public.
Lastly, financial executives may also opt to create blind trusts in order to keep their trading activities discrete for legal business purposes.
How Can I Create a Blind Trust?
The most important element for setting-up a blind trust are the permission documents that give power of attorney to a designated individual (e.g., usually the trustee). In order to create any type of trust, the trust property must be assigned to a third party trustee through a legal instrument that is signed by the grantor, and the trust must be valid.
Generally speaking, the following requirements must be met to form a valid trust:
- The settlor (or trustor) must have the legal capacity and present intent to form both the trust itself as well as the relationship with their appointed trustee;
- The trust documents must contain a description or title that easily identifies the property or assets being held in the trust;
- The settlor must also either specifically identify the beneficiaries (i.e., the recipients) of the trust, or at the very least, describe how the recipients of the trust will be chosen;
- After the trust is created and a trustee is selected, the settlor must deliver the legal title to the property and/or assets to the trustee; and
- The settlor must have a valid purpose for creating the trust.
Again, the above list provides a general description of what may be required to form a basic trust. However, there are many other specific state and federal laws that must be complied with when forming an actual blind trust.
For instance, with a blind trust, the settlor will not have any further contact with the trustee once legal title is delivered. This means that the settlor will not receive any information regarding trust activity.
As such, it is crucial that the settlor selects a trustee who is experienced, trustworthy, honest, and knowledgeable about managing finances. A financial advisor or an attorney may be a safe choice when appointing a trustee to oversee a blind trust.
Do I Need to Hire an Estate Lawyer for Help with a Blind Trust?
In general, the laws governing trust and estate matters can be difficult to understand on their own. This task only becomes more difficult when applying their meanings to trust documents because something as small as a typo or grammar error can ultimately lead to destroying the intent of a trust or its settlor’s wishes.
Therefore, you may want to consider hiring a local estate lawyer to either administer your blind trust or assist you in setting one up. Having your own attorney to review trust documents and answer questions can make a huge difference between whether your trust is successfully or unsuccessfully executed.