# Blind trust funds **URL:** \ **Category:** Factual Questions\ **Created:** [January 11, 2009, 10:25pm UTC](https://boards.straightdope.com/t/blind-trust-funds/480842 "2009-01-11T22:25:14Z")\ **Posts on this page:** 4\ **Page:** 1
**Author:** ![jakesteele](https://avatars.discourse-cdn.com/v4/letter/j/ed8c4c/32.png) [@jakesteele](https://boards.straightdope.com/u/jakesteele)\ **Post date:** [January 11, 2009, 10:25pm UTC](https://boards.straightdope.com/t/blind-trust-funds/480842/1 "2009-01-11T22:25:14Z")
I need some help on understanding exactly what is a BTF, who it works and how it benefits you. I’ve heard many times that the very rich use them to hide, protect and earn untaxed interest or something to that effect. ---
**Author:** ![IAmNotSpartacus](https://avatars.discourse-cdn.com/v4/letter/i/cc9497/32.png) [@IAmNotSpartacus](https://boards.straightdope.com/u/IAmNotSpartacus)\ **Post date:** [January 11, 2009, 10:30pm UTC](https://boards.straightdope.com/t/blind-trust-funds/480842/2 "2009-01-11T22:30:57Z")
From [Wiki](http://en.wikipedia.org/wiki/Blind_trust), which distills the description better than I can: > [@](#): > > A blind trust is a trust in which the fiduciaries, namely the executors or those who have been given power of attorney, have full discretion over the assets, and the trust beneficiaries have no knowledge of the holdings of the trust and no right to intervene in their handling. Blind trusts are generally used when a settlor (sometimes called a trustor or donor) wishes to keep the beneficiary 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 often place their personal assets (including investment income) into blind trusts, to avoid public scrutiny and accusations of conflicts of interest when they direct government funds to the private sector. ---
**Author:** ![LSLGuy](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/lslguy/32/5813_2.png) [@LSLGuy](https://boards.straightdope.com/u/LSLGuy)\ **Post date:** [January 11, 2009, 10:34pm UTC](https://boards.straightdope.com/t/blind-trust-funds/480842/3 "2009-01-11T22:34:05Z")
You’ve mixed a bunch of concepts together. Simplifying mightily, you can think of a trust as sort of like a corporation with one customer, you, and one business, managing your money. The critical thing is that people die every 70-100 years, but corporations live forever. So if I’m a fat cat and all my money is really in a corporation, then when I die, the corp doesn’t and the money lives on without being involved in estate taxes. Before I die I just leave orders that after I’m gone the corp will take care of my wife & kids & follow their orders instead of mine. Likewise, if I run over your kid & you try to sue me, I don’t have hardly any money. The trust has all my fat cat money & it didn’t hurt your kid, so you can’t sue it. Result: my money is safe from lawsuits. At various times over the years, businesses were taxed differently than fat cats, and so by parking money in the trust, the tax owed on the investment income was much lower. It also provides opportunities to hide money more effectively than an ordinary schmoe with an account at Charles Schwab could. Finally, a “blind” trust is a special kind used mostly by politicians. The idea is that you don’t know what investments the trust has, and it makes its own investment decisions without consulting you. So you won’t be tempted to vote in a way that works best for you at the expense of your constituents. At least that’s the theory. Anyone reading who really knows trusts will recognize that I’ve simplified this to the point that it’s almost pure BS. But my version captures the essential flavor of what trusts accomplish & why people use them. ---
**Author:** ![friedo](https://avatars.discourse-cdn.com/v4/letter/f/8edcca/32.png) [@friedo](https://boards.straightdope.com/u/friedo)\ **Post date:** [January 12, 2009, 1:16am UTC](https://boards.straightdope.com/t/blind-trust-funds/480842/4 "2009-01-12T01:16:25Z")
> [@LSLGuy](#): > > The critical thing is that people die every 70-100 years, but corporations live forever. So if I’m a fat cat and all my money is really in a corporation, then when I die, the corp doesn’t and the money lives on without being involved in estate taxes. Before I die I just leave orders that after I’m gone the corp will take care of my wife & kids & follow their orders instead of mine. Putting your assets in a trust does _not_ avoid estate taxes. Under certain circumstances, it can lower them. It does avoid the probate process, because you can designate your survivors to become the active trustee(s) upon your death, and this happens immediately without having to go through probate. > [@](#): > > Likewise, if I run over your kid & you try to sue me, I don’t have hardly any money. The trust has all my fat cat money & it didn’t hurt your kid, so you can’t sue it. Result: my money is safe from lawsuits. Only sometimes. It depends on the jurisdiction where your trust is set up. Only a few states allow trusts that are completely protected from creditors. ETA: I just saw this part > [@](#): > > Anyone reading who really knows trusts will recognize that I’ve simplified this to the point that it’s almost pure BS. But my version captures the essential flavor of what trusts accomplish & why people use them. So never mind. 😛