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A blind trust is a
trust Trust often refers to: * Trust (social science), confidence in or dependence on a person or quality It may also refer to: Business and law * Trust law, a body of law under which one person holds property for the benefit of another * Trust (bus ...
in which the trust beneficiaries have no knowledge of the holdings of the trust, and no right to intervene in their handling. In a blind trust, the
trustee Trustee (or the holding of a trusteeship) is a legal term which, in its broadest sense, is a synonym for anyone in a position of trust and so can refer to any individual who holds property, authority, or a position of trust or responsibility to ...
s (
fiduciaries A fiduciary is a person who holds a legal or ethical relationship of trust with one or more other parties (person or group of persons). Typically, a fiduciary prudently takes care of money or other assets for another person. One party, for exampl ...
, or those who have been given power of attorney) have full discretion over the assets. Blind trusts are generally used when a trust creator (sometimes called a
settlor In law a settlor is a person who settles property on trust law for the benefit of beneficiaries. In some legal systems, a settlor is also referred to as a trustor, or occasionally, a grantor or donor. Where the trust is a testamentary trust, the s ...
, trustor, grantor, or donor) wishes for the beneficiary to be unaware of the specific assets in the trust, such as to avoid conflict of interest between the beneficiary and the investments. Politicians, or others in sensitive positions (such as journalists and religious leaders) often place their personal assets (including investment income) into blind trusts, to avoid public scrutiny and accusations of
conflicts of interest A conflict of interest (COI) is a situation in which a person or organization is involved in multiple interests, financial or otherwise, and serving one interest could involve working against another. Typically, this relates to situations in ...
when they direct government funds to the private sector.


Use by US government officials to avoid conflicts of interest

The US federal government recognizes the "qualified blind trust" (QBT), as defined by the
Ethics in Government Act The Ethics in Government Act of 1978 is a United States federal law that was passed in the wake of the Nixon Watergate scandal and the Saturday Night Massacre. It was intended to fight corruption in government. Summary The Ethics in Governmen ...
and related regulations. In order for a blind trust to be a QBT, the trustee must not be affiliated with, associated with, related to, or subject to the control or influence of the government official. Because the assets initially placed in the QBT are known to the government official (who is both creator and beneficiary of the trust), these assets continue to pose a potential conflict of interest until they have been sold (or reduced to a value less than $1,000). New assets purchased by the trustee will not be disclosed to the government official, so they will not pose a conflict.


British party funding

In the United Kingdom, while the Labour Party was in opposition in 1992–97, its
front bench In many parliaments and other similar assemblies, seating is typically arranged in banks or rows, with each political party or caucus grouped together. The spokespeople for each group will often sit at the front of their group, and are then kno ...
received funding from blind trusts. One set up to fund its campaign in the 1997 general election received donations from wealthy supporters, some of whose names leaked out, and some of whom received
life peerage In the United Kingdom, life peers are appointed members of the peerage whose titles cannot be inherited, in contrast to hereditary peers. In modern times, life peerages, always created at the rank of baron, are created under the Life Peerages ...
s into the House of Lords after Labour won the election. The Neill Committee's report in 1998 found the use of blind trusts to be "inconsistent with the principles of openness and
accountability Accountability, in terms of ethics and governance, is equated with answerability, blameworthiness, liability, and the expectation of account-giving. As in an aspect of governance, it has been central to discussions related to problems in the pub ...
" and recommended that such trusts be "prohibited as a mechanism for funding political parties, party leaders or their offices, Members of Parliament or parliamentary candidates" This was incorporated into the
Political Parties, Elections and Referendums Act 2000 The Political Parties, Elections and Referendums Act 2000 (c. 41) is an Act of Parliament of the United Kingdom that sets out how political parties, elections and referendums are to be regulated in the United Kingdom. It formed an important ...
as section 57 "Return of donations where donor unidentifiable".


References

Wills and trusts {{law-term-stub