What Is A Blind Trust?

Many people wonder, ‘what is a blind trust?’.  A blind trust is a type of trust that is commonly used by people who are in a government office or other public figures to help them avoid potential conflicts of interest.  In a blind trust, a trustee is assigned to manage the assets inside the trust for the benefit of the trust beneficiary.  The trust beneficiary is not allowed to know what investments are held within the trust, or have any input as to how to invest the money.  This way, if the trust beneficiary were to find out about inside information about a company, he or she could not act on that information with the trust assets.  This is one type of trust commonly used in estate planning.

If a public official did not use a blind trust for his or her investments, the only other way to avoid conflicts of interest would be to simply not invest in anything.  They would be limited to owning bank CD’s or treasury bills, etc.  Blind trusts help these individuals avoid being accused by others of conflicts of interest, and also avoid being tempted to take advantage of information they may have.  It’s called a blind trust because the beneficiary cannot see what is held inside the trust.

A blind trust is not just for someone who is super rich or wealthy.  Anyone who is a public official, or who is in a sensitive public position could protect themselves from scrutiny by using a blind trust.  In the trust they would be able to specify the general perameters for investing such as asset allocation (the mix of stocks, bonds and cash), and the timeframe for the investment to be used.  But beyond that, the trustee will manage the particular investments, and would be paid for their services.

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