All About Estates

Blind Trusts and Fireworks

 

“My assets are huge, just huge. If I had to put them into a blind trust, it would be the blindest trust of all time. You would have to stare directly into a solar eclipse to achieve the blindness of my trust.”

– President Donald Trump (but not really)

What better way to celebrate The Fourth of July than by making fun of politicians? Let the fireworks begin…..

Oh, say can you see

A blind trust is a trust arrangement where the beneficiary has no knowledge of the asset makeup and no right to intervene in the management of the trust. This type of trust comes up mostly with politicians and individuals in sensitive positions in order to avoid conflicts of interest between the beneficiary and their investments.

For example, let’s say Prime Minister Peter owns shares in oil companies. There would clearly be a conflict of interest if I were to make policy decisions on the oil industry and building pipelines. For this reason, where securities make up part of the blind trust’s assets, beneficiaries are not permitted to know details about any specific holdings.

Gave proof through the night that our trust was still blind

The Donald J. Trump Revocable Trust holds the President’s investment and business assets (The Trump Organization) and is managed by Trump’s sons. But when the assets are known to the beneficiary, is the trust achieving its purpose? Donald Trump is not going to forget that he owns the “fabulous Mar-a-Lago resort”.

Barack Obama did not place his assets in a blind trust either, but it’s so much cooler when he doesn’t do something. At the time of his Presidency, Obama’s money was mostly invested in U.S. treasury bonds and other funds unlikely to cause a conflict.

Most U.S. Presidents have voluntarily placed their assets in blind trusts. When Hillary Clinton ran for president in 2007 she took this a step further, when she liquidated her existing blind trust to eliminate any investments that might create a conflict. Too bad she wasn’t as careful about her emails.

The President of the United States is not required by any law to place their assets in blind trusts (just as they are not required to disclose their tax returns, especially if they are currently under audit).

Canadian politicians are more trustworthy, right?

That’s the funniest line I’ve ever written.

At the same time he sponsored pension reform legislation, Finance Minister Bill Morneau still held substantial shares in Morneau Shepell, a human resource and pension management firm where he had been executive chair. Morneau was cleared by Canada’s ethics commissioner who “found that he did not place himself in a conflict of interest in making decisions leading to the introduction of Bill C-27.”

Although the passing of the Bill has stalled since 2016, Moreau has stated he will donate the difference in the value of his shares between his election date and the day they’re sold.

Don’t Have a Cow

Under P.E.I.’s Conflict of Interest Act, Cabinet Ministers must put their business interests and investments into a blind trust. Although Ministers can’t engage in the management of a business carried on by a corporation, exceptions can be granted if a business activity will not create a conflict between the Minister’s private interest and public duty.

Back in May, Bloyce Thompson was sworn in as P.E.I.’s new Minister of Agriculture and Land, Justice and Public Safety, and Attorney General. As if that job title wasn’t long enough, this dairy farmer also still plans to milk his cows every morning.

Thompson is going through the process of receiving an exemption with P.E.I.’s Conflict of Interest Commissioner, but my vote is that a Cow Trust needs to be created. I could milk that topic for a few blog posts at least.

Ideally, a trustee of a blind trust should convert existing assets into new assets. As some of the above examples show, a politician can’t always be truly blind to his/her business interests. Maybe a transparent compromise is to donate any increase in asset value achieved for a certain period after he/she leaves office?

Very few jurisdictions actually legislate that individuals who hold public office must use a blind trust for the duration of their tenure. Depending how you look at it, blind trusts might just be a moot point, or a moo point, if you’re a dairy farmer that loves Friends.

About Peter Meitanis

3 Comments

  1. Ryan

    July 4, 2019 - 1:43 pm
    Reply

    Trust me, this may be the single greatest blog post in ABE history. Well done.

  2. David Tremblett

    July 4, 2019 - 2:20 pm
    Reply

    great blog Peter !

  3. Gurpreet

    July 8, 2019 - 12:58 am
    Reply

    Love reading your blogs ( very humorous )

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