Blind Investment Trusts

Frequently, when men and women are elected to public office, they must place their investments into a "Blind Investment" Trust. This is to prevent them from using the powers of their political office to influence the performance of their investments. The investments and property still belong to them, but while they are in office an appointed Trustee manages the property for them. When their term of office expires, or they retire or leave office for any reason, the assets and full control over them returns to the individual.

The power of a Trustee to manage investments is found in the Uniform Probate Code in Sec. 16223-16226. One does not have to be a politician to utilize one of these trusts. Stock brokerage accounts are often in the form of a trust where the stock broker, as Trustee, has descretionary powers to buy, sell and manage an investment portfolio.

Anyone with investment capital can set up such a trust and appoint a trustee to manage their investments. Usually, the Trustee is a specialist with particular knowledge about certain investments.

Why use a trust? One reason is accountability. Trust laws have the highest standards of fiscal accountability to be found in any U.S. legal code. Secondly, the activities of a Trustee can be bonded through a fiduciary bond. If the Trustee acts less than responsibly, the bonding company will cover any losses. The Trustee's fidelity is insured. A third reason is professional convenience. A professional Trustee is handling one's investment strategy with time, ability, and business expertise. Finally, a Trustee can use the services of professional funds managers, who are well acquainted with trusts, to get superior returns for investors.

If the beneficiary of the trust is someone other than the investor, the Trustee can have certain powers and authorities over distributions. For example, if a trust beneficiary has a history of substance abuse, the Trustee may be empowered to withhold distributions until that beneficiary has proven that they are "clean and sober."

While Hatcher & Associates does not sell investments, we have provided Blind Investment Trusts through a law firm in Los Angeles which has managed investments which have paid Trustors a monthly income stream of 2% (24% per year). This is not guaranteed, but is a "best effort based on past performances." Since the investments are held in a trust, the trust is closely supervised by the State Bar and the IRS for the protection of the Trustors.

In this particular case, these trusts run for 13 months. A Trustor may either renew the trust for another term or have their principal returned to them. They tend to perform better than insurance company annuities for income distribution and trustors using them do not face losses from surrender charges nor are they involved in long term committments. The Trustee uses the investment services of SEC licensed funds managers who utilize a number of investment scenarios. The risk element is generally less than that of a mutual fund.

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