Quora Answer: What are the Benefits of a Blind Trust?

The following is my answer to a Quora question: “What are the benefits of having a blind trust fund?”

There are no financial benefits of a blind trust over a normal trust.  Blind trusts have a specific purpose: to disguise the assets of a trust and the source of funds.  Blind trusts are used when the settlor or grantor of the trust does not want the beneficiaries to know the specific assets of the trust, for whatever reason.  This is, perhaps because the settlor does not want the beneficiary to discover the identity of their benefactor, or the source of the funds, which may be controversial.  Blind trusts are more often used in cases where the settlor is also the beneficiary.  Politicians, people in public office, and people in sensitive positions where there may be a conflict of interests often use blind trusts.  Blind trusts protect them from scrutiny, since the assets are secret.

In another example, blind trusts may also be used to launder money for political parties, politicians, policy makers, and people in power, by creating a slush fund where the donors are supposedly unknown.  Since the source of funds are secret, it is difficult to prove any shenanigans by auditors.  Donors pay into the fund to support their cause, and the beneficiaries miraculously know what needs to be done.

That is why, in many places, they are illegal for this purpose.  In the US, for example, politicians are encouraged to create blind trusts to avert allegations of conflict of interest, but it does not address the issue of influence buying.  In fact, it makes it far easier.  I do not believe, for one moment, that these politicians do not know the source of their funds when they set up the blind trust.  It is a cosmetic exercise that does not solve the problem.