All About the Blind Trust
During a presidential election cycle, interesting legal issues concerning criminal law, civil rights and social issues often arise. Rarely do estate planning topics enter the national debate, other than the occasional discussion of tax policy. But recently, the candidates and the media have been raising the issue of blind trusts. These trusts have long been recognized estate planning devices, even before they became political issues.
What Are Blind Trusts?
Although blind trusts are being talked about in regard to Donald Trump’s business holdings, they have in fact been used by many politicians, long before Trump ran for president. In fact, blind trusts have always been a popular tool used by politicians, seeking to create the appearance of neutrality, and eliminate conflicts of interest.
In their simplest terms, someone who is looking to start a trust will turn over some level of control of the assets that are put into the trust. The trustee will manage the trust according to the terms set by the person who started it (sometimes called a grantor).
Some trust terms allow the grantor great control, and some much less, depending on the kind of trust.
Rarely does a grantor start a trust and completely allow the trustee to make all decisions about the trust, without the grantor even being aware of them.
But in effect, this is what a blind trust is. The trustee has complete authority to manage the trust, or invest or spend trust assets, with little restriction. In fact, the grantor not only has no control, but doesn’t even know what decisions the trustee is making (hence the trust being “blind”).
In order to make the trust truly blind and avoid undue influence, the trustee is often someone who is trusted by the settlor, but who is not a relative of, or significantly close to, the grantor.
Trust is a Tool For Politicians
As you may imagine, this is an unnerving concept for most businesspeople. But for politicians seeking to separate themselves from any conflict of interest, it can be a useful vehicle.
The politician can keep the business going presumably in reliable hands, and ensure the income is still available to support his or her family, and that the business will be there when the political career is over. It’s a much preferred option to dissolving the business or selling the interest in the business.
In fact, these trusts are so useful in the political arena, they are regulated by the federal government. The Office of Government Ethics prohibits disclosing information about a blind trust to either the grantor or the general public. Doing so is actually a criminal violation. The trustee can still pay the income from the trust, but the source is kept confidential.
Like any trust, a blind trust can be revocable or irrevocable, and will have the same creditor protections and asset protections that these kinds of trusts would have. In other words, the fact that a trust is blind, by itself, doesn’t impact its level of asset protection.
Make sure that you know all the available tax and asset protection vehicles when managing your business and assets. Contact Tampa business, asset and probate attorney David Toback to discuss a comprehensive personal and business tax and estate plan.