Blind Trust Definition and Legal Meaning

On this page, you'll find the legal definition and meaning of Blind Trust, written in plain English, along with examples of how it is used.

What is Blind Trust?

“A trust that retains the settlor’s right to terminate the trust, but relinquishes all power over the trust’s management.

History and Meaning of Blind Trust

A blind trust is a legal arrangement in which the trustee, who manages the trust assets, has full discretion over the assets and those who benefit from them. This means that the settlor has no knowledge of how the assets are being managed or invested. The trustee, on the other hand, does not provide any information about the trust to the settlor or beneficiary.

The origins of the blind trust lie in the conflict-of-interest laws that were enacted in the US in the 20th century. These laws were created to prevent politicians and administrators from benefiting from their position by using their influence to favor certain companies or individuals. By placing their assets in a blind trust, these individuals could distance themselves from any potential conflicts of interest.

In recent years, blind trusts have become popular among wealthy individuals who want to ensure that their investments are managed in a manner that is impartial, and free from their own biases or preferences.

Examples of Blind Trust

  1. A politician sets up a blind trust in order to avoid any conflicts of interest that may arise from their investments.

  2. A wealthy individual puts their assets into a blind trust so that they can benefit from an unbiased and impartial approach to investment management.

  3. An inheritance is placed into a blind trust to ensure impartial management of the assets, free from the personal preferences or biases of the beneficiary.

Related Legal Terms

  • Trust: A legal arrangement in which a trustee manages assets on behalf of a beneficiary.
  • Settlor: A person who creates a trust and transfers assets into it.
  • Beneficiary: A person who benefits from a trust
  • Conflict of Interest: A situation in which an individual's personal interests may conflict with their duties or obligations to others.
  • Trustee: A person who holds assets in trust on behalf of a beneficiary.