Back to: INHERITANCE, ESTATES, & TRUSTS

What is a Blind Trust?

A blind trust is a type of trust in which the beneficiaries of the trust are not aware of the holdings of the trust; instead, the trustees have full knowledge or discretion over the holdings of the trust. Also, the grantor or trustor has no control over activities undertaken within the trust and has no right to intervene in how the holdings of the trusts are handled. Regardless of this, the trustor has the right to terminate the trust since the trust was initiated by him. In a blind trust, the trustees gives no report to the trustor neither do they provide any information to the trust beneficiaries.

How Does a Blind Trust Work?

In a blind trust, the trustees are given power of attorney over the holdings of the trust, that is, they exercise full discretion over the assets. Blind trustors also have no access or control over the holdings of the trust. Blind trusts are often used by influential individuals who have been given a political appointment or elected into political office. The need for a blind trust arises for such individuals to avoid being put in a difficult position because of their investment holdings, they then entrust their investment holdings to trustees. In blind trusts, the beneficiaries have no knowledge of the trust holdings and how they are managed. The trustor however can exercise the right to terminate a bind trust. He can also set rules on which the blind trust will be run or managed but might not receive any reports from the trustee.

Options Outside the Blind Trust

Blind trusts are often used by politicians who have enormous wealth and need to avoid conflict of interest with the position the hold. To set up a blind trust, a huge amount of money is required and it is also expensive to manage or operate. Due to the expensive nature of blind trusts, there are other options for wealthy politicians outside blind trust which includes the conversion of all investment holdings to cash and sale of specific investments. However, any of these methods have tax implications which many wealthy politicians try to avoid, hence, a blind trust remains the perfect option for most of them.

Related Topics

• Succession Planning
• Chartered Trust and Estate Planner
• Conservatorship
• Probate
• Cy Pres Doctrine
• Exordium Clause
• Non-Contestability (No Contest) Clause
• Bequest
• Per Stirpes
• Ademption
• Abeyance
• Elective Share
• Escheat
• Qualified Domestic Relations Order (QDRO) 
  
• Declaration of Trust
• Uniform Gifts for Minors Act
• Acceptance of Office by Trustee
• Beneficial Interest
• Asset Protection Trust
• Bare Trust
• Blind Trust
• Charitable Lead Trust
• Charitable Remainder Trust
• Charitable Remainder Annuity Trust
• Charitable Gift Annuity
• Credit Shelter Trust
• Discretionary Trust
• Generation Skipping Trust
• Grantor Trust Rules
• Living Trust
• Inter Vivos Trust
• Revocable Trust
• Irrevocable Trust
• Irrevocable Income-Only Trust
• Qualified Domestic Trust (QDOT)
• Qualified Terminal Interest Protection Trust (QTIP)
• ABLE Account
• Accumulated Income Payments (Canada)
• Charitable Split-Dollar Insurance Plan
• Coverdell Education Savings Account