Blind Trusts

Almost nobody reading this needs a blind trust. It solves exactly one problem—you hold assets you are legally barred from knowing about, because knowing would create a conflict of interest—and that problem belongs to senior federal officials, some state officeholders, and executives under a specific regulatory mandate. If you merely feel awkward about owning stock in your employer’s sector, you do not have a blind trust problem. You have a diversification problem, and the fix is to sell the concentrated position and buy broad-market index funds or Treasuries, which raise no conflict question because you own the whole market, not a bet on anyone. That costs a brokerage commission instead of five figures a year.

If you genuinely are in scope, understand that a qualified blind trust is a regulated instrument, not a drafting style. The Ethics in Government Act, recodified in 2022 at 5 U.S.C. §§13101 et seq., defines it at §13104(f)(3), and the trust instrument and trustee must be approved by the supervising ethics office before execution (5 C.F.R. §2634.404). Signing first and seeking blessing afterward does not work. Three features define it:

• An independent trustee. The trustee must be a financial institution or professional fiduciary independent of you—no prior family, business, employment, or client relationship (5 C.F.R. §2634.405, standards for becoming an independent trustee). Your longtime advisor is disqualified precisely because they are your longtime advisor.
• A total information barrier. The trustee has complete discretion to buy and sell, and the rule is stricter than most people assume: there must be no direct or indirect communication about the trust between you and the trustee except for a short list of pre-approved categories—requesting a cash distribution, stating a general financial interest, or giving notice of a statutory conflict (5 C.F.R. §2634.408). Anyone the trustee engages must likewise be instructed never to disclose information identifying current or disposed-of holdings. What you do receive: an annual report of the aggregate income attributable to your beneficial interest, categorized so you can complete your public financial disclosure form but without identifying any asset, plus the quarterly income figures you need to pay estimated tax.
• Your original assets stay conflicted until they are gone. This is the trap. Funding the trust does not clear the conflict on what you put in: 18 U.S.C. §208 and the other conflict-of-interest rules keep applying to each asset you transferred until the trustee notifies you it has been sold or has fallen below $1,000 in value (5 C.F.R. §2634.403(b)). A blind trust makes you blind going forward; it does not erase what you already know.
• You still pay the tax. The trust is a revocable grantor trust, so its income is yours and lands on your Form 1040 (IRC §§671–679). The trustee supplies consolidated figures without tickers, so you file accurately while staying blind.

Two things a blind trust is not. It is not an estate planning tool—being revocable, it saves no tax and sits entirely in your gross estate (IRC §2038). And it is not asset protection; your creditors reach it exactly as they would reach your brokerage account. It buys regulatory compliance, nothing more, and it bills you annually for the privilege.