Fusing the words “blind” and “trust” in relation to your assets sounds unsettling, but it actually makes sense in some situations. As the name suggests, a blind trust is a type of living trust when a grantor and their beneficiary are blind about how a third-party individual or organization known as the trustee oversees the trust assets.
There are different blind trust statutes that every state follows. For instance, California’s administrative code states that a trustee must be a disinterested party who needs to exercise complete discretion in managing the trust assets. This rule means the trustee must still work in the grantor’s and beneficiaries’ best interests.
So, if a blind trust means you must relinquish control over your assets, why would you want to establish one?
When letting go protects you
The primary reason for setting up a blind trust is to avoid situations involving actual or perceived conflicts of interest. Simply put, it is about separating your private interests from your public affairs. It may seem like the type of trust applicable only to those with considerable assets, but you can always utilize it if your situation warrants it.
- Government officials: As a publicly elected official, you might find yourself at a crossroads between protecting your personal investment in a company you have equity or acting in your constituents’ best interests.
- High-profile executives and other influential individuals: You would want to shield yourself from any potential risk or criminal allegation if you have confidential insider information that directly impacts your company’s finances.
- Retiring or retired businessmen: You may want to pursue politics, charitable causes or any institution requiring you to act with impartiality.
- Lottery winners: When you receive an unexpected fortune, you would prefer to stay away from the public limelight and steer clear of family, friends or relatives living off your back.
With so much at stake and no control over your finances, having an explicit trust agreement and a trustworthy trustee should help keep your finances intact.
Weighing your options
Cutting yourself from the loop about a significant part of your life is difficult. However, if having a legal tool safeguarding your private and public affairs still outweighs the loss of oversight over your assets, consider having a legal counsel to guide you through your financial vision.