How to Set Up a Blind Trust

By Michael Butler

People, including judges, politicians and business executives, use blind trusts to avoid conflicts of interest because in a blind trust the beneficiary does not know how the trustee handles the assets of the trust. Lottery winners sometimes use blind trust to preserve anonymity. In other aspects, blind trusts are the same as other types of trusts.

People, including judges, politicians and business executives, use blind trusts to avoid conflicts of interest because in a blind trust the beneficiary does not know how the trustee handles the assets of the trust. Lottery winners sometimes use blind trust to preserve anonymity. In other aspects, blind trusts are the same as other types of trusts.

Step 1

Read the trust laws in your state or consult with a licensed attorney. Trusts are established as a matter of state law, so you need to follow the proper procedures for your state.

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Step 2

Gather the documentation for the assets you want to transfer to the trust after it is formed.

Step 3

Appoint a trustee. Remember that you will be blind as to how the funds in the trust are handled, so your trustee should be trustworthy and financially responsible. If you do not know someone personally that you want to name as the trustee, hire a bank, trust company or attorney to act as the trustee. You may also want to appoint a backup trustee should something happen to your first selection.

Step 4

Draw up the trust agreement. It is advisable to have an attorney draft the trust agreement for you to insure that it works as intended. Make sure the trust documents indicate how the trustee should disperse assets to you and include when the trust ends. Both depend on your reason for needing a blind trust. A blind trust can be either revocable or irrevocable.

Step 5

Sign and notarize the trust agreement. If your state has trust recording laws, follow them to report the trust to the state.

Step 6

Transfer the assets to the blind trust so that the trustee can begin handling the trust.

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How to Terminate a Living Trust

References

Related articles

How Does a Blind Trust Work for Lottery Winners?

A blind trust is a type of irrevocable living trust in which the trustee has full authority to invest trust assets, and the trust beneficiary has no right to know what property is owned by the trust. Lottery winners sometimes use them because they help avoid many of the problems that come with winning a large lottery prize.

How to Terminate Blind Trusts

A blind trust is a special type of trust where the beneficiaries are unaware of the trust's assets and a designated trustee has full authority to manage the trust, including the purchase, sale and exchange of its assets. Politicians and corporate officers often set up blind trusts to avoid conflicts of interest and public scrutiny. In some states, it is legal for a lottery winner to set up a blind trust so that he can anonymously claim his winnings. A trust creator, called the settlor, can set up his blind trust as either a revocable or irrevocable trust. If the blind trust is set up as a revocable trust, the settlor can terminate the trust by following the revocation procedure set forth in either the trust agreement or state statutes. While revoking an irrevocable trust is not always impossible, the process is difficult as it usually requires court approval and consent of all the trust beneficiaries. Common reasons a settlor may want to terminate his blind trust include a change in financial circumstances, unhappiness with the trust’s beneficiaries or desire to shelter trust assets from tax authorities.

What Is the Average Cost to Prepare a Living Trust?

When considering an estate plan, many people contemplate whether a trust is necessary or a will alone is suitable. The choice is often based on cost. Depending on whether an attorney is hired, a trust can be considerably more costly than a will. The key is finding a balance between cost and creating an estate plan that fits your family’s needs.

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