Legal Tip 365: What is a Blind Trust?

It is a trust that cannot see.


Blind trusts have been in the news a bit lately. The concept of a blind trust is that a person, the beneficiary, gives some money to a trustee and says ‘here, invest this and don’t tell me about it, just give me the income’. The trustee can then invest the money without the beneficial owner knowing what it is invested in.

This can avoid conflicts of interest for those that work in Parliament or even in other situations which there might be a potential conflict of interest.


Example

Homer works in a bank where he gets insider information all the time so he is prohibited from investing in shares. He can’t even set up a discretionary trust and invest that way as he could lose his job and worse. So he sets up a blind trust so that he cannot see what the trustee invests in. This way Homer cannot use the insider knowledge he has, either deliberately or non-deliberately.


But what is being reported in the news as a blind trust doesn’t appear to be a blind trust.


Example 2

Marge is a politician. She has some personal expenses paid by someone else and she claims she doesn’t know who paid them or where the funds come from.


This is not a trust at all, but someone paying her bills. It is akin to a donation as it is not her money.

 

What is a blind trust and what role did it play in Christian Porter's resignation?

 

The claim of blind trust for political funding has been caught in the UK and defined as unsuitable for pollies.

British party funding
In the United Kingdom, while the Labour Party was in opposition in 1992–97, its front bench 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 peerages into the House of Lords after Labour won the election.[3] The Neill Committee's report in 1998 found the use of blind trusts to be "inconsistent with the principles of openness and accountability" 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" [4] This was incorporated into the Political Parties, Elections and Referendums Act 2000 as section 57 "Return of donations where donor unidentifiable".[5]

I can see why a blind trust and paying the bills are different things, but Porter has defined the thing as 'Blind' even though its not. So it is just a fib? Not a good one either?

 

There is no fixed definition of 'blind trust'. So he could call what has happened a blind trust even though it is not recognised as such. Just like you can call a dog a cat I guess.