With all the people jumping into the 2020 Presidential race, we are sure to hear a lot about blind trusts over the next year or two. Blind trusts are most commonly used in the political community, but this vehicle can also be quite valuable in other situations.So what exactly is a blind trust?
A blind trust is designed to eliminate any real or perceived conflicts of interest. A blind trust can be revocable. That means the grantor or creator of the trust can change it later. It also can be irrevocable, meaning it can’t be modified or terminated.
Investopedia says in the article “How to Establish a Blind Trust” that while the concept of putting assets into a trust and then giving up all knowledge and control of those assets might sound a bit loony, in certain situations, it can make perfect sense.
To avoid any conflicts of interest, a blind trust may be used by retiring or retired business owners and executives who keep large amounts of company stock and may be interested in politics, charitable work, or board membership that requires them to act objectively.
A blind trust also may be a good idea when a person suddenly comes into a large, unexpected sum of money and wants to keep the matter private (e.g., lottery winners).
Creating a blind trust requires an attorney to draft a document that the creator signs to give full power of attorney over the trust assets to an independent, third-party trustee. An experienced trust attorney is the best professional to handle this, because there are state and federal laws governing the creation of blind trusts.
When you draft the trust, you can provide input like what the investment objective of the trust will be. However, after that, you stop communicating with the trustee and have no further information on how the trust’s assets are being handled.
You also must select the right trustee. It should be someone who’s honest and investment savvy, and if you’re trying to separate yourself from your investments, it should be a person with whom you’re not close.
One of the main goals of our law practice is to help families like yours plan for the safe, successful transfer of wealth to the next generation. Call our office today to schedule a time for us to sit down and talk about your estate plan, where we can identify the best strategies for you and your family to ensure your legacy of love and financial security. Our office is located in Santa Ana, CA but we serve all of California including Irvine, Orange, Tustin, Newport Beach, and Anaheim.
Reference: Investopedia (May 25, 2018) “How to Establish a Blind Trust”