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What Is a Blind Trust?

A trust is a financial arrangement set up to distribute assets and wealth to specific parties. The beneficiary of a blind trust will have no knowledge of assets or inheritances related to the trust. The trustees and those with power of attorney are given all of the power in relation to the trust. They are in charge of decisions and knowledge of the building blocks of the trust.

Who Needs a Blind Trust?

There are many kinds of trusts, but people set up blind trusts specifically to keep their financial activity discrete. Sometimes, there are conflicts of interest that the beneficiary might have with any of the investments. Disputes, or potential disputes, between family members can be kept at a minimum.

People who have high public visibility such as politicians or celebrities may want to keep their assets and financial activity private. A blind trust allows them to do so. This keeps scrutiny from the public at a minimum and reduces risk of conflict of interest allegations. This is especially important when funds from the government are used in a private capacity.

Sometimes, people who come into great wealth suddenly, such as when they win the lottery or receive a large inheritance, opt for a blind trust option. This is again an issue of privacy and anonymity. A blind trust allows them to keep their personal information secret from the public.

Financial executives can also use blind trusts to keep their trading activities discrete.

How Can I Create a Blind Trust?

The most important element of a blind trust are the permissions documents that afford power of attorney to a trusted individual. The assets must be assigned to a third party trustee with a legal document signed by the grantor. 

The trust must be legally binding and contain the elements of any other kind of trust:

  • Grantor: the individual who forms the trusts and supplies the assets.
  • Assets: the financial resources the trust assigns.
  • Beneficiaries: the individuals who will receive financial assets through the trust.
  • Trust instrument: the document that executes the trust.
  • Trustee: an individual other than the grantor who will carry out the intent of the trust.

With a blind trust, the grantor has no contact with the trustee and is not informed on the activity of the trust. It is very important to select a trustee who is experienced, trustworthy, honest, and knowledgeable. A financial advisor or an attorney is a safe choice.

Do I Need an Estate Lawyer?

Trusts and estates law are not only extremely complicated, but are also a sensitive process that can be derailed by something as seemingly small as misplaced punctuation. It is extremely important to choose an estate lawyer to administer your trust. For execution of a blind trust, the right choice of attorney will be the difference between successful and unsuccessful execution of the trust.

Photo of page author Danielle Winterton

, LegalMatch Legal Writer

Last Modified: 03-23-2016 12:05 PM PDT

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