The original intent of a blind trust was to shield the presidential office from apparent conflicts. But as tension ramps up, a more traditional defense would come in handy.
The president himself is traditionally above civil liability for conduct while in office. If he breaks the law, he could simply take the political blowback and pardon himself or appoint a successor who will.
But even if he’s untouchable, his businesses and charities may not enjoy the same level of privilege. Lawsuits against the Trump Organization and other entities continue.
And as subpoena power in Congress flips parties, the pressure isn’t going to ease. Investigations and hearings will multiply from here.
That’s where the Trump family legal structure can become a liability in itself.
Targeting the entities around the people
For years the Trump Organization’s assets were owned through a network of limited liability companies, which is a great structure if you want to protect the individual officers from the obligations of the business.
By definition the LLC limits personal liability. If the company runs up debt or legal penalties, the executives generally don’t have to compensate creditors out of pocket.
However, that doesn’t exempt the companies themselves from litigation when someone objects to their business practices or simply wants to create a nuisance.
We’ve seen the National Enquirer’s corporate parent targeted for its role in the election. Instead of fighting, they effectively confessed and agreed to cooperate with additional investigations.
Otherwise, the people might have been eligible for pardons but the company itself would face full legal penalties, even shutting down in the worst scenario.
The owners would feel the sting even if they weren’t personally responsible for the day-to-day operations.
Similar pressure on the Trump Organization and its satellites like the Trump Foundation seems at least partially motivated by a drive to hurt the president through his assets even if he personally remains untouchable.
The logic plays out the same way. If an LLC gets into legal trouble, the officers’ exposure is limited but the owners suffer the financial consequences.
And when the officers and the owners are the same people, owners with enemies become a liability.
That’s why the right trust structure would’ve protected Trump and his assets from what's likely to be a storm of lawsuits ahead.
Revocable trust is no shield
At its core, a trust is a way to officially separate legal ownership and control from individual liability.
An individual transfers assets to the trust, which then manages the property on behalf of named beneficiaries. From that point, the trust and the grantor are separate individuals and generally aren’t exposed to each other’s obligations.
Trump has transferred at least some of his corporate interests into a trust just as he claimed. In theory those assets are now outside his control and shouldn’t share his liabilities.
Unfortunately, that’s not how the trust seems to be structured. For one thing, it’s a revocable structure, which means he still controls the assets and ultimately maintains legal ownership.
That’s because he can change the terms at any time. Only if he’s incapacitated or dies do the trustees take over.
It’s only a “blind" trust to the extent to which he chooses to stay in the dark over what’s going on at the Organization that still bears his name.
Apparent confusion over who the trustees really are doesn't help limit legal exposure between the various people and entities involved.
A short certification the trust turned over to transfer a liquor license stipulates that there are “no” trustees beyond Donald Jr. and Trump Organization CFO Allen Weisselberg.
That’s a problem for Eric, who has been described as a third trustee in the past. Maybe he’s got some kind of “advisor” title but in terms of the trust’s real inner workings it’s all just fluff.
And since the president’s official financial disclosure still lists him as trustee, his continuing role only gets muddier.
The grantor of a revocable trust always retains ultimate control of the assets. But if the goal is to create distance between his personal sphere and the operations, claiming the trustee title goes in the wrong direction.
Either way, whoever’s in charge is responsible and whoever owns it is financially vulnerable if its operations are impaired.
The trustees have a responsibility to the trust and its beneficiaries. As far as we know, the president remains the only beneficiary, so that duty is clear.
Can the trustees go against the grantor? Where the trust is still revocable, the answer is “not really.”
For the trustees to have real control, the assets would have needed to be transferred irrevocably into the trust.
That’s not what happened here, but in the right jurisdiction it would've been exactly what Trump would have needed to officially separate himself from his companies.
This is a New York trust. He can't do that there.
A true asset protection trust is shielded from personal persecution in ways a revocable trust just can’t match. All it needs is a real independent trustee calling the shots.
When the trustee turns
On the other hand, Allen Weisselberg is also cooperating with various investigations into the Trump holdings, so in hindsight giving him complete control of the empire probably wouldn't have been the most attractive idea.
As trustee he only has a fiduciary duty when he’s in charge. When the trust is revocable, there’s no authority and no personal responsibility at stake.
Weisselberg is apparently free to follow his personal interest, conscience or both.
Donald Jr. is in a more complicated position. This is one of those scenarios where appointing a professional trustee would clarify where family ends and finance takes over.
Either way, presidential trusts historically function to eliminate even the appearance of conflicts of interest. That’s why they’re “blind” and why outside trustees call the shots.
This time around, a strong trust would also protect the presidential assets from political threats that cross over to private life.
This trust doesn’t look that strong. To build a legal wall between the individual and his assets, you need to draw firm lines of responsibility, ownership and control.
And now the entities look more vulnerable than the man in charge. As the probes stack up, his wallet still bleeds.
