Blind Trust Vs. Revocable Trust

By Erika Johansen

A trust is a legal structure used to safeguard assets. Revocable trusts and blind trusts serve distinctly different functions. Trust law is very state-specific; those with questions about setting up a particular trust should enlist a local legal professional or an online drafting service.

Basics of Trusts

All trusts share certain basic characteristics. The creator of the trust, who becomes known legally as the "settlor", places his assets in the trust and picks a trustee to manage the assets. The entire trust then operates for the benefit of one or more other parties, known as beneficiaries. The settlor provides instructions for how the trust is to be managed by the trustee in the language of the trust document.

Revocable Trusts

A revocable trust, also typically known as an inter vivos trust, is a trust the settlor creates during his lifetime and retains the power to revoke, or end, and take back any remaining assets. However, if he doesn't revoke the trust, when the settlor dies, the revocable trust becomes an irrevocable trust and is incapable of being revoked or modified. Settlors have the option of creating an irrevocable trust during their lifetimes, but most settlors like the ability to later modify a trust if circumstances change. Revocable trusts can be an important estate planning tool, since they have the potential to allow a transfer of assets outside of the probate process.

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Blind Trusts

In a blind trust, a settlor transfers assets to a third party who has complete discretion in how to use or invest the assets. In the typical blind trust, the settlor is also the beneficiary; thus, the trustee is managing the assets for the benefit of the settlor. However, the settlor/beneficiary can't give any instructions to the trustee about what to invest in; he has absolutely no knowledge of how the assets are invested or what they're being used for.

Blind Trust Use

The primary use of a blind trust is by politicians and other public figures to avoid the appearance of a conflict of interest. Politicians who choose their own investments may be open to accusations of making political decisions on the basis of their own self-interest. By placing the assets in a blind trust, the politician can benefit from his assets without being responsible for how and when they increase in value.

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What Is the Power of a Trustee in a Testamentary Trust?
 

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The Difference Between a Grantor & a Beneficiary

Grantor is the legal term for a person who creates a trust, and beneficiaries are people named by the grantor to benefit from the trust by receiving the trust's property. The legal terms "grantor," "settlor," and "creator" have the same meaning and can be used interchangeably. A grantor and beneficiary have different roles in a trust, but either may serve as trustee of the trust. Although the grantor establishes a trust and may have the authority to change it, beneficiaries also have authority to amend or revoke the trust and take legal action to protect the trust in certain circumstances.

What Is Diversion of Property From a Trust?

Diversion of trust property is a legal term used to describe the misapplication or misuse of trust property. Not only does diversion of trust property violate the terms of the trust itself, but it's often a criminal act. A trust agreement forms a contract between the person who sets up the trust in the first place, the trustee and the beneficiary. The trustee has a fiduciary duty to act in the best interests of both the trust and its beneficiary.

Can a Trustee Be a Beneficiary in Illinois?

Trusts are a popular method for transferring property to others in Illinois. Its chief advantage is that all the assets in the trust are kept out of probate, allowing the beneficiaries to receive the property immediately after a decedent's death. Also, unlike a will, which is published during the probate process, the contents of a trust is kept private. For every trust there must be someone to manages the trust, known as a trustee, and people who benefit, known as beneficiaries. Each state has its own standards regarding how trusts can be structured and what roles a person may hold in a trust. Illinois is no exception.

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