{"id":894,"date":"2017-11-20T18:57:59","date_gmt":"2017-11-20T18:57:59","guid":{"rendered":"https:\/\/www.jacksonwhitelaw.com\/arizona-estate-planning\/?page_id=894"},"modified":"2022-07-09T20:34:18","modified_gmt":"2022-07-09T20:34:18","slug":"what-is-a-blind-trust","status":"publish","type":"post","link":"https:\/\/www.jacksonwhitelaw.com\/arizona-estate-planning\/blog\/what-is-a-blind-trust\/","title":{"rendered":"What Is a Blind Trust?"},"content":{"rendered":"
Before delving into the specifics of a blind trust, it helps to understand what a trust is and how they operate. A trust<\/a> is a legal agreement where an individual (known as the trustor or settlor) transfers ownership of certain assets to an account managed by a trustee (also known as a fiduciary<\/a>). The trustee then operates the trust on behalf of the designated beneficiaries. The trustor will clearly outline how the trust is to be managed in the trust agreement. Sometimes the trustee will oversee the assets for a short period of time until the account is gifted to the beneficiaries. Other times, the trust is intended to run indefinitely, providing investment income for generations to come. Either way, the trustee is responsible for prudently managing the assets and investments while they are held in trust.<\/p>\n A trust can be revocable<\/a> or irrevocable. With a revocable trust, the trustor can modify the terms of the trust agreement, dissolve the trust, and reclaim assets transferred to the trust, as long as they are alive. Upon the trustor\u2019s death, the trust would become irrevocable. An irrevocable trust cannot be modified or dissolved. Assets transferred to an irrevocable trust are permanently gifted to the trust, and cannot be reclaimed by the trustor. In some situations, an irrevocable trust can be modified by the beneficiary, but that hinges on the language and provisions in the trust agreement.<\/p>\n A blind trust is a trust agreement where neither the trustor or the beneficiaries have any control or influence over the assets in the trust. Once assets are transferred to a blind trust, the trustee is able to freely buy and sell assets according to the mandates of the trust agreement. The trustor and beneficiaries cannot know what assets are being held, what is bought or sold, what the annual returns are, etc. They cannot contact the trustee for updates on holdings, principal, or returns, and they cannot give the trustee any input or directions regarding management of the assets.<\/p>\n Blind trusts are typically used when the trustor is facing potential conflicts of interest between their profession and their personal assets. If there is a possibility that professional decisions can directly impact someone\u2019s personal wealth or business interests, a blind trust provides an ethical solution to preclude moral dilemmas. Blind trusts aren\u2019t intended to last forever, so they can be revocable or irrevocable. In both cases, the trustor and the beneficiary are usually one in the same, so when the potential conflicts of interest that warrant the blind trust are gone, they can reclaim their assets.<\/p>\n One of the most common situations that warrants a blind trust is when an individual is elected to public office. Politicians with international holdings may be tempted to use their position of influence to lower taxes or tariffs, ease trade barriers, or otherwise influence regulation that would benefit their foreign interests. They could be tempted to grant lucrative government contracts to businesses in which they are personally invested, or push legislation that would benefit businesses, industries, or sectors which represent a substantial portion of their investments.<\/p>\nWhat is a Blind Trust?<\/h2>\n
When are Blind Trusts Necessary?<\/h2>\n
Blind Trusts for Elected Officials<\/h2>\n