Have you ever heard the term “blind trust” used and wondered just what it meant? Using a blind trust avoids even the hint of impropriety or self-dealing. In many estate plans, there is no need for a blind trust.
As always, there are exceptions. Elected officials — and those working in both the public and private sectors and looking to avoid conflicts of interest — may need to consider blind trusts.
What is their purpose?
If someone has an interest in assets held in trust, they can theoretically thumb the scales in their economic favor in decisions they make as candidates, elected and appointed officials and board members. Placing assets in a blind trust bars that person from managing the trust assets. Rather, a neutral third party controls the trust completely, thus making any decisions not be made for the official’s self-interest.
Lotto winners may need them
Do you buy lottery tickets? If you ever win a significant amount, a blind trust can help you control your spending while ensuring you live a comfortable life. It prevents people (even spouses in some cases) from latching onto you and draining your funds.
Who should be the trustee?
To prevent exploitation or manipulation, ideally, the person chosen to be the trustee will be someone with nothing to gain from the issue. Finding a neutral third-party assures all that your interests aren’t furthered by your position, votes or interests.
Both legal and financial professionals can serve in this capacity. It’s often the best place to start, as any relatives or close friends could one day be accused of making decisions that benefit you or your portfolio.
