Individuals in Delaware may wonder what is meant by the term “blind trust” and whether a blind trust would be a useful estate planning tool. In general, blind trusts are used by public figures to separate themselves from direct association with one of their sources of wealth. The “blind” in the name of the trust refers to the fact that a settlor places certain assets in the trust for a trustee to manage without the settlor’s input as to how the trust is being managed.
One example of a situation in which such a trust would be used is if a person is a politician with assets that might appear to create a conflict of interest. With a blind trust, the person can turn the assets over to someone else to manage and would therefore be not be able to derive any influence therefrom.
In other ways, a blind trust resembles other types of trust. In addition to a trustee, a beneficiary is designated to receive the trust’s proceeds. The settlor who owns the assets and establishes the trust may also be the beneficiary.
Even if an individual is not a politician, there may be other reasons to set up a blind trust. For example, a person might be the prominent director of an organization with assets that either conflict with the goals of that organization or that might appear to unduly influence the director’s decisions. In such a case, setting up a blind trust may distance the original owner from the assets and any decision-making about them. While the choice of a good trustee is always important, it is even more so with a blind trust since the settlor and beneficiary must have no knowledge as to how the trust is being managed.