A trust is a sort of “container” used to hold different assets. However, there are different kinds of trusts. One of the most popular varieties in California is the blind trust, often used to preserve the funder’s privacy while avoiding conflicts of interest.
The Blind Trust
A blind trust is a form of living trust. Unlike some other types of trusts, a blind trust is completely controlled by a designated trustee. The person who funds the trust—also known as the settlor or trustor—and their beneficiaries do not have any control over the blind trust, nor will they receive information about the status of assets deposited into it.
People often establish blind trusts when they want their assets to be managed professionally, objectively, and equitably. However, blind trusts can also be useful for people who desire privacy.
Government Officials and Blind Trusts
Many politicians and other government officials set up blind trusts to avoid conflicts of interest. In fact, the United States Senate has specific rules meant to prevent politicians from abusing their authority for self-gain. For example, a politician who is passing legislation or writing policy may be inclined to favor programs which benefit their investment assets.
A blind trust lets people who may have conflicts of interest establish a legacy without having to worry about how their official duties may affect their investment portfolios and asset holdings.
Setting up a Blind Trust
While a blind trust is often part of a comprehensive estate plan, it can also be a stand-alone arrangement. A blind trust should be managed by an independent, third-party trustee granted the power of attorney to act as your agent. The third-party trustee is often someone who has experience managing assets and trusts such as an estate planning attorney.
However, blind trusts are not easy to set up. A blind trust has to meet very specific legal criteria, and they can be expensive to establish. You should always seek professional guidance when investing in a blind trust.
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