You’ve been planning and saving for years, so congratulations on getting to a point where you are ready to start your business.
Before you file your LLC, consider your best options in order to protect yourself.
Politicians, judges and high-powered business people with immense public scrutiny are among the many who use blind trusts to avoid perceptions of conflicts while running their personal finances.
An anonymous trust is a type of trust that allows individuals to store assets in a way that the beneficiary has no control over them. This reduces the likelihood that an individual’s actions will impact their own net worth.
An anonymous trust, or blind trust, provides protection against liability for both personal and company assets if done correctly.
How Do You Set Up An Anonymous Trust?
Here’s how you can set up an anonymous trust in 3 easy steps.
Step 1: Form an anonymous trust
Gather the documentation for the assets that you want to put into a blind trust. This could mean certificates of stocks, bonds or real estate deeds.
If you would like to put any property in your trust, you’ll need proof of ownership.
Your business may be protected from lawsuits under a Series LLC, but in case of litigation, your company might be at risk if you are the sole beneficiary of an anonymous trust created for the company.
An anonymous trust can mitigate the risk of a lawsuit in three different instances: legal, factual, and financial.
Step 2: Make the anonymous trust a member of your LLC
Who would have imagined that was even possible?
A lawsuit proceeds when there are assets to seize; a plaintiff must prove this before taking action.
Adding an anonymous trust as a member of your LLC limits the risk of a lawsuit by hiding any assets you control.
If they cannot find any assets, a lawyer will not pursue a lawsuit against you or it is unlikely.
By putting your assets in an LLC, you are able to mitigate any legal liability should a dispute arise.
Step 3: Keep lawsuits away with uncertainty
Most lawyers will work on contingency, meaning they hear the merits of the case from potential plaintiffs, analyze its potential size and payout, then negotiate their fee accordingly.
When the plaintiff’s lawyer can’t find out who owns an LLC with anonymous trust members, they’re unlikely to take on a case where it could take years.
How Much Does It Cost to Set Up a Blind Trust?
According to My Bank Tracker, setting up a blind trust costs between $1,000 to $10,000 and incurs yearly fees, as much as 3 percent of trust assets.
Blind trusts can be very expensive to set up and require the help of a financial professional who will charge for any associated fees.
Setting up a blind trust can be costly, and there are other costs related to the trust that you may incur over time. When considering setting up your own blind trust, think long-term about the total cost of such an investment.
- Open your Aspiration Spend & Save Account and fund your account with at least $10.
- Use your Aspiration debit card to make at least $1,000 of cumulative transactions within the first 60 days of opening your account.
- You're good to go!
Reasons to Use a Blind Trust
A blind trust is used to avoid conflicts of interests when a prominent business person ends up running for public office.
Using this as an example: Part of your compensation from working at an oil and gas company was probably stock in the company, which can be problematic when you end up running for political office.
If you were to win a race for the United States Senate, and in your new role as a senator, you could be in a position to pass legislation that impacts your former company.
You can’t make decisions for your assets that are based on what you do in the Senate, nor vice-versa. Remember, you know what’s going into the trust but not what comes out of it.
Also, people who suddenly come into a lot of money may choose to establish blind trusts as a way to maintain their financial privacy.
Whether you think it is worth playing the lottery, winners of the lottery often desire to remain anonymous, which is an asset when it comes to a large amount of money. When more than one person has a claim to the prize, that may be resolved through a blind trust.
The Bottom Line
A blind trust is a way to protect yourself from potential legal disputes and can help you mitigate financial risks.
You’ll always need to provide paperwork proving assets are in the trust, and you need to appoint a designated trustee. As such, you can end the trust whenever you want.
A blind trust is the perfect legal vehicle for business people who want to separate their financial life from their professional life.
It’s an excellent way to avoid conflict of interest issues or ensure privacy.
The most important part of creating a blind trust is finding a trustworthy trustee.
Giving someone power over your assets is a big responsibility.
But, with the right person overseeing your personal finances, a blind trust can protect your financial stability.
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