How to Set Up a Blind Trust

A blind trust is one in which the beneficiary has no idea how the trustees are managing the trust assets. Politicians sometimes place investments in a blind trust, with themselves as beneficiary, to avoid conflicts of interest. Corporate insiders sometimes do the same thing to avoid insider trading charges. A lottery winner may create a blind trust to collect and hold her money so that she won't be harassed by people asking for handouts. A blind trust must meet your state's trust code, so research the code before setting up the trust.

Draw up a trust agreement detailing how your blind trust will operate. If you're a lottery winner, you might want a trust that puts $10,000 in your bank account on the first of every month. If you just won election to the state senate, it might be important that the trust terminates and gives you back the assets as soon as you leave office.

Identify the assets you want to place in the trust. If your goal is to avoid conflict of interest charges, for example, your investments should go in the trust, but you may want to keep your house in your name. If you're a lottery winner, your jackpot, obviously, goes in the trust.

Appoint a trustee. Since he will have complete control of your assets, it must be someone you can trust to handle the funds honestly. Some states have legal requirements for trustees: In California, for example, the person who manages your blind trust cannot be a close relative.

Sign the trust agreement in front of a notary. Have the notary place her seal on the agreement to confirm its validity. If you're an elected official, you may have to file a copy of the agreement with the government.

Transfer your assets to the blind trust. You transfer land by signing a deed conveying title to the trust; brokerage and investment firms will have procedures in place for you to transfer over stocks or mutual fund accounts.

Follow any reporting requirements under federal or state law. California elected officials, for instance, have to file a report when the trust sells any assets. The trustee will notify the politician of the sale, but cannot provide information about any subsequent purchases.