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UNDERSTANDING BLIND TRUSTS

A blind trust is a certain type of legal vehicle that is used when the person who owns the assets shouldn't be able to know how the assets or being managed or have a hand in the management of the assets. Blind trusts are not something you'd use in common financial and estate management situations, but they can be a valuable tool when ethical or legal restrictions make it difficult to maintain ties with your own wealth or businesses.

Perhaps the most well-known use of blind trusts have to do politicians. While many will associated blind trusts with American presidents, anyone who holds political office might benefit from such an arrangement. A political officer is seen has having some sway over regulations, rules or laws that can impact business. He or she might be able to persuade others to agree with them -- whether or not they meant too -- because of their position. It's an unfair financial and business advantage.

By putting their assets in a blind trust that is managed by someone else, political officers build a wall between their political title and the management of their funds. They might still receive income from their assets -- or that income might be saved for a time when they are no longer in political office -- but they can't influence the management of those assets.

Business executives might also use blind trusts. A chief executive officer (CEO) of a company who owns stock in that company might use a blind trust to hold his stock so that business decisions he makes aren't tied to his own investment management. Understanding whether you might need a blind trust usually requires talking to an estate law attorney, who can help you understand all your options and how you might use them in current and future financial plans.

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