New Mexico Blind Trust Lawyer

A blind trust is a special type of trust where the grantor (the person creating the trust) removes the ability to see what activities are taking place within the trust. This inability to know about changes within the trust also extends to beneficiaries since beneficiaries may keep the trustor apprised of updates — and the trustor is often named as a beneficiary themself.

The purpose of a blind trust is to remove possible conflicts of interest. They are most commonly created by politicians, but they may also be used by those in charity work, people with high-ranking company positions, members of organizational boards, and others for whom access to insider information could create the temptation to alter their decision-making for the sake of personal gain.

During estate planning, blind trusts may also be created in order to prevent beneficiaries from having knowledge of the full contents of the trust.

When exploring your options for creating a blind trust, it is absolutely essential to get quality legal advice. The structure of a blind trust will have significant ramifications for your financial future since it cannot be altered by anyone except the appointed trustee once it is funded and active unless it is later dissolved.

New Mexico Financial & Family Law can provide you with a New Mexico blind trust lawyer who is highly experienced with creating these arrangements. Determine your best options, and get answers to questions for your specific situation when you call 505-503-1637 or contact us online to schedule a confidential consultation appointment.

When Should I Reach Out to a New Mexico Blind Trust Attorney?

Any time you are considering the formation of a special trust, such as a blind trust, it is highly recommended to solicit the services and guidance of an attorney who is experienced in trust creation.

At New Mexico Financial & Family Law, we have been assisting business owners, families, and individuals with their long-term estate planning for over 25 years. In many cases, our clients’ needs require the creation of a special trust arrangement in order to fulfill their goals.

Blind trusts are a relatively rare form of trust arrangement, but they can be all but necessary in certain situations. Common scenarios where a blind trust may be suggested, or even required, include a situation where someone:

• Decides to run for public office or is appointed to a position of responsibility by a public official
• Owns a high volume of company stock and is in a position of authority within the same company
• Wants to serve as a member of a board of trustees for one or more institutions
• Serves in a high-ranking position for a charitable institution or policy research “think tank” and wants to remove their connections to certain industries or the general appearance of conflicts of interest
• Wishes to keep the contents of a trust entirely managed by the trustee, with no information or input provided to their beneficiaries
• Wants to put distance between themself and their investments, for any reason, while still being able to draw benefits, such as income or gains in equity, from their holdings
• Has significant financial holdings or wealth and is a close family member to someone in any of the above situations

Blind Trusts for Public Officials

The most-common situation where someone may elect to form a blind trust is when that person runs for public office, especially a higher office, such as a mayor, governor, or congressional representative. In these situations, they will want to demonstrate to the public that they are willing to take away their control of their wealth portfolio in order to avoid the appearance of conflicts of interest.

Conflicts of interest for public officials with significant wealth holdings can arise in two primary ways:

• The official has access to limited information, such as when a new policy will go into effect, and that information could cause them to alter their portfolio in a way that brings them personal gains — e.g., insider trading.
• The official may make certain decisions not for the benefit of the public they serve but solely to increase the gains they make within their private portfolio.

If you are considering running for public office, or you have received notice that you are a candidate for appointment by a public official, you may be required to file disclosure statements and to create a blind trust for items you wish not to disclose publicly (see more below).

Blind Trusts for Corporate Officers

Corporate officers may elect to (or be required to, according to company by-laws) place their stock and other company holdings into a blind trust. Doing so removes the appearance of making decisions for the purposes of personal financial gain, rather than for the good of the company and its shareholders, as a whole.

Blind trusts may also be expected (or required) when the individual has significant holdings with another company that is capable of affecting the operations at the company in which they currently serve. If they hold a lot of stock with a competitor, for example, or own a company that provides vendor contracts to their employer company, a blind trust may be an appropriate consideration.

Blind Trusts for Members of Boards or Charitable Institutions

The contents of your financial portfolio can affect the appearance of self-interest when serving as an important member of a board of trustees or other major institution.

While it is not uncommon for board members to hold stock in the companies they serve — along with many other companies — members with particular authority or who intend to serve for an extended duration may elect to place certain holdings in a blind trust in order to establish good will among their other board members, as well as within the organization they serve.

Blind trusts may be particularly appropriate for individuals forming, employed by, or serving as a board member for a charitable institution. While the activities of a charity can rarely create the opportunity for self-enrichment by unscrupulous individuals, those who serve charitable institutions may still wish to demonstrate their commitment to focusing entirely on the mission of the charity, as opposed to their own financial gain.

A blind trust may be especially appropriate when there is a potential conflict of interest, such as if the individual owns or is heavily invested in a company that could provide services to the charity as a contractor. It may also be appropriate when their holdings lend the appearance that they are contrary to the mission of the charity, such as if they wish to work with a climate change action organization but have a portfolio that includes fossil fuel-producing companies.

Blind Trusts for Family Members of Public Officials or Other Positions Requiring High Moral Responsibility

In some cases, the holdings of a close family member may come under scrutiny if it is possible that a public official (or other individual vested with a high level of trust by an institution) could have their decision-making affected by their desire to benefit a loved one.

Most often, it is a spouse who will place some of their assets into a blind trust in order to avoid the appearance of impropriety. Rarely, it may be a parent, sibling, or other individual, as long as they have significant holdings and a close relationship with the person entrusted with a high level of moral responsibility.

Using a Blind Trust for Estate Planning

In addition to avoiding the appearance of a conflict of interest for themself, an individual may wish to set up a blind trust so that their future beneficiaries can avoid having their own decision-making affected by knowledge of what’s in the trust.

A common example is the creation of a trust intended to benefit family members who are currently legal minors. The creator of the trust may want to avoid a situation where the individual knows they will have a certain amount of monthly income, which could deter their motivation to pursue job skills and a personally rewarding career.

In this case, the trustor may set up a trust that pays a certain amount to the relative each month but does not disclose its full contents or the full terms of the income arrangement.

Blind trusts can also be used to avoid having beneficiaries communicate with one another or other family members, so as to avoid conflicts or attempts to access the contents of an estate through a legal contest.

Are Individuals Serving in Public Positions Required to Set up a Blind Trust?

Blind trusts are widely seen as a vehicle for avoiding corruption for the benefit of the public good. In the words of Investopedia:

Since a perceived or real conflict of interest could arise if that official is involved in legislation that affects their investments, placing those assets in a blind trust, especially an irrevocable one, is supposed to allow the official to act impartially and in the best interests of constituents.

Blind trusts by public officials came into increasing use following the passage of the Ethics in Government Act of 1978 (EIGA). The act requires that all U.S. congressional members — as well as other individuals appointed or elected to positions of authority — provide annual financial transparency statements.

The specific wording of the act requires an annual financial disclosure report disclosing the following information:

1. Sources amounts of income, gifts, and reimbursements;
2. The identity and approximate value of property held and liabilities owed;
3. Transactions in property, commodities, and securities; and
4. Certain financial interests of a spouse or dependent.

Reports are also typically requested when someone is announcing their candidacy and when they have decided to leave office. These reports provide transparency to important ethics oversight bodies, not to mention the general public.

The only way to avoid having to disclose information pertaining to the above financial interests is to place assets and other holdings into a blind trust. This trust must comply with certain requirements as defined by federal law or the law of the applicable state where the person is serving (or intends to serve).

New Mexico Blind Trust Definition

New Mexico statutes § 13-1-32 (2023) defines a blind trust as follows:

“Blind trust” means a trust managed by a person other than the employee-beneficiary in which the employee-beneficiary is not given notice of alterations in the property of the trust.

The above statute only applies to government employees who are involved in assigning contracts with the government.  As stated above, there is no general law in New Mexico otherwise governing blind trusts.

Are There Penalties for Failing to Comply With the Ethics in Government Act of 1978?

There are no specific penalties or criminal procedures outlined in the EIGA. Instead, the appropriate ethics committee may recommend an investigation, often referring the matter to the U.S. Department of Justice or the appropriate department within the official’s home state.

A prosecutor or attorney general can then elect to file a civil action against the official for non-compliance, as well as for any alleged conflicts of interest. Any activities that violate U.S. laws or state laws applying to the official may lead to a possible criminal investigation.

Realistically, though, the EIGA is a law with “no teeth,” meaning that it is primarily self-enforced. Policy organizations like the Campaign Legal Center recommend updates to the EIGA in light of recent spates of non-compliance, with little to no attempts to enforce the letter of the law.

On the other hand, failure to abide by the terms and expectations of the EIGA — or other similar transparency laws — can result in accusations of impropriety or even the appearance of scandal. Anyone serving the greater public who feels nervous about the implications of their investment holdings and the nature of their financial activities should strongly consider creating a blind trust in order to establish trust with and demonstrate good faith towards the general public.

Reach Out to an Experienced New Mexico Blind Trust Law Firm

New Mexico Financial & Family Law can help you come to critical decisions about your financial future, including whether you want to form a blind trust or look to other, less-final options.

Our experienced estate planning attorneys can help you with tasks such as:

• Determining the ideal structure and terms of the trust
• Deciding what assets and holdings to place within the trust
• Whether to make a revocable or irrevocable trust
• Who to appoint as a trustee
• How to arrange for the long-term maintenance of the trust since you cannot oversee its management and operation after its formation

When you are ready to talk with a team of experienced professionals about your future financial plans, New Mexico Financial & Family Law is ready to help. Contact us at any time when you call 505-503-1637 or reach out to us online to schedule a confidential consultation with no obligation.