A blind trust is a special type of trust designed to prevent conflicts of interest.
In a blind trust, the person who creates the trust (the “grantor”) transfers assets to an independent trustee — and then gives up control and knowledge of how those assets are managed.
It’s called “blind” because the grantor does not know what specific investments are being bought, sold, or held inside the trust.
Why Would Someone Create a Blind Trust?
Blind trusts are most commonly used by:
- Public officials
- Judges
- Elected representatives
- Corporate executives
- Individuals in positions of regulatory authority
The purpose is to avoid conflicts of interest or the appearance of impropriety.
For example, if a government official owns stock in a company affected by legislation they are voting on, that could create ethical concerns. Placing those assets into a blind trust helps eliminate that issue.
How Does a Blind Trust Work?
- The grantor transfers assets into the trust.
- An independent trustee (often a professional fiduciary or financial institution) is appointed.
- The trustee has full discretion to manage the assets.
- The grantor does not receive detailed information about specific holdings or transactions.
The grantor may still receive income or distributions from the trust, but they do not control investment decisions.
What Makes It Different from Other Trusts?
In most trusts — even irrevocable ones — the grantor or beneficiaries often receive regular reports about assets and performance.
In a true blind trust:
- The trustee acts independently.
- The grantor cannot direct investments.
- The grantor typically does not know the trust’s specific holdings.
The separation is intentional and designed to maintain ethical boundaries.
Is a Blind Trust Revocable or Irrevocable?
A blind trust can be either, depending on how it is structured. However, to truly eliminate conflicts of interest, it is often irrevocable and managed entirely by an independent trustee.
The specific structure depends on the legal and ethical requirements involved.
Benefits of a Blind Trust
- Reduces conflicts of interest
- Helps public officials comply with ethics laws
- Protects decision-making integrity
- Maintains privacy of investments
- Provides professional asset management
Limitations of a Blind Trust
- Loss of control over investments
- Limited transparency for the grantor
- Ongoing trustee fees
- Not necessary for most individuals
Blind trusts are typically not used for ordinary estate planning. They serve a specific compliance and ethics function.
Who Should Consider a Blind Trust?
A blind trust may be appropriate if you:
- Hold public office
- Are appointed to a regulatory position
- Have fiduciary responsibilities that could conflict with personal investments
- Need to comply with ethics rules or conflict-of-interest laws
For most families, other types of trusts are more appropriate for estate planning and asset protection.
The Bottom Line
A blind trust is a powerful tool for preventing conflicts of interest and maintaining ethical independence. While it is not commonly used in everyday estate planning, it plays an important role in public service and high-level corporate governance.
If you are considering a blind trust due to professional or ethical obligations, it’s important to work with an experienced attorney to ensure proper structure and compliance with applicable laws.
