A blind trust is a type of living trust where the grantor and 澳洲幸运5官方开奖结果体彩网:beneficiary relinquish control and knowledge of the assets placed within the trust. Instead, a third-party trustee manages the assets without disclosing or consꩵulting the grantor o൲r beneficiary about the specific investments or transactions. 

A 澳洲幸运5官方开奖结果体彩网:blind trust can be 澳洲幸运5官方开奖结果体彩网:revocable, meaning the grantor can change it later, or 澳洲幸运5官方开奖结果体彩网:irrevocable, meaning it can’t be modified or terminated. Blind trusts can be a valuable strategy for eliminating conflicts of interest, particularly in situations involving politics💦, business, or sudden wea𒁃lth.

How a Blind Trust Works

Public officials and corporate executives often use blind trusts to avoid conflicts of interest. For instance, a federal official may set up a blind trust to manage private assets owned by themselves, their spouse, or 澳洲幸运5官方开奖结果体彩网:dependent children. This prevents any perceived or actual conflict ⭕of interest if the official’s decisions affect their financial holdings. By pla🍎cing these assets in a blind trust, especially an irrevocable one, the official can act impartially, focusing on the interests of the public.

The official’s supervisory ethics entity must approve the blind trust and the choice of trustee. Federal law doesn’t require federal officials to use blind trusts, but regulates how they establish and maintain them. 

Similarly, corporate executives can use blind trusts to avoid 澳洲幸运5官方开奖结果体彩网:insider trading accusations. By transferring their company shares into the trust, they no longer control the timing or amount of stock sold, reducing any insider trading risks. The trustee manages the assets, which could improve the executive’s asset 澳洲幸运5官方开奖结果体彩网:diversification and 澳洲幸运5官方开奖结果体彩网:risk profile and help avoid legal complications tied to trading windows and 澳洲幸运5官方开奖结果体彩网:blackout periods. 

While you might read a lot about blind trusts during political campaigns, “not many politicians or wealthy individuals and families use them,” says , a 澳洲幸运5官方开奖结果体彩网:financial planner and investment advisor with Evermay Wealth Management, an independent financial advisory firm serving 澳洲幸运5官方开奖结果体彩网:high net worth families in the Washington, D.C., area. “Not only do you give up the control and transparency of assets placed in trust, these vehicles can cost tens of thousands of dollars to set up,” he says. They also have high 澳洲幸运5官方开奖结果体彩网:maintenance expenses. 

Reasons to Establish a Blind Trust

A blind trust is supposed to eliminate any real or perceived 澳洲幸运5官方开奖结果体彩网:conflicts of interest. 

Blind trusts “are most prevalent within the political community, but can be quite valuable in other situations as well,” says . “This is a very obvious reason for politicians, but retiring or retired business owners and executives who retain large amounts of company stock may be interested in politics, charitable work, or board membership that requires them to act objectively,” he says. “The trust may also come in handy when influential individuals have access to insider information and want to shield themselves from any question of wrongdoing for investment account🌠 transact🌃ions.”

Another circumstance that inspires people to set up blind trusts is suddenly coming into a large, unexpected sum of money and wanting to keep the matter private. For example, savvy lottery winners in the United States have used blind trusts to prevent investment hucksters and money-grubbing relatives from trying to snag a piece of their sudden wealth.

How to Establish a Blind Trust

Establishing a blind trust requires drawing up a document that the grantor signs to give full 澳洲幸运5官方开奖结果体彩网:power of attorney over the trust assets to an independent, 澳洲幸运5官方开奖结果体彩网:third-party trustee (In contrast, with a regular, revocable living trust, the trust settlor can designate themself as the trustee and continue to control the assets.) But it’s not a DIY project; it requires a lawyer’s assistance. 

“There are state and federal laws regarding the creation of blind trusts, so it’s important to visit an attorney who has expertise in this area,” says , CFP, managing director and senior financial advisor with Calamos Wealth Management, an independent 澳洲幸运5官方开奖结果体彩网:wealth management firm in Miami. “During the drafting phase of the trust, you have the ability to provide input such as what the investment objective of the trust will be. For example, should it be investedꦗ for growth, income, or capital preservation? You have the ability to provide a 🔴range for the asset allocation and you have the ability to name the beneficiaries of the trust,” he says. 

After that, you cease communication with the trustee and have no further knowledge🐭 of how the trust’s assets are being handled.

Choosing the right trustee is imperative. Not only do you need someone who is honest and investment savvy, but if you’re trying to separate yourself from your investments, you also need someone with whom you don’t have a close relationship—not a friend or relative, in other words. In some cases, even a longtime 澳洲幸运5官方开奖结果体彩网:financial adviser or attorney might be considered too close.

For example, in the case of a lottery win, an attorney could help establish the blind trust. Depending on the requirements of the lottery you win, the attorney can redeem the winning ticket anonymously and prevent unwanted media exposure.

The Bottom Line

Blind trusts can be powerful tools for removing conflicts of interest, maintaining privacy, and safeguarding against accusations of misconduct. However, they are not without their down♎sides, including high costs and a complete loss of control. If you are considering establishing a blind trust, it’s crucial to weigh the benefiꦉts of privacy and independence against the costs and lack of transparency, especially if you are opting for an irrevocable trust. Legal and financial professionals can help guide you through the process to ensure the trust aligns with your financial goals.