Can the President put his assets in a blind trust managed by his family members?

Question

Now that Donald Trump has been elected President, there has been a lot of discussion about the conflicts of interest that would arise from his company. There have been calls for him to put his assets in a blind trust, which is where your assets are managed buy a stranger who doesn't tell you how he's investing them, to avoid conflicts of interest. Trump has said that he plans to put his company in a blind trust, but he's also said that his adult children will run his company, which is not how a blind trust works.

Apropos of this point, this Bloomberg View article by Tim O'Brien says this:

And then add this complication: The Office of Government Ethics forbids family members from overseeing blind trusts for those working in the executive branch, so the Trump children might not be eligible to run their family business.

My question is, what ethics rule is O'Brien referring to? Is this a rule that requires executive branch officials to put their assets in a blind trust? Or is this simply a rule that says that if an executive branch official chooses to have a blind trust, then it cannot be be run by his family members (which would just be a restatement of the definition of a blind trust)?

Answer 1

To answer the question, no, one probably can't put assets into a blind trust managed by one's own adult children. I don't believe anyone has ever actually tried that, but it would probably fail if they did.

The nature of a “blind trust,” generally, is such that the official will have no control over, will receive no communications about, and will (eventually as existing assets are sold and new ones obtained by the trustee) have no knowledge of the identity of the specific assets held in the trust.

Financial Assets and Conflict of Interest Regulation in the Executive Branch Congressional Research Service

and

In establishing a qualified blind trust upon the approval of the appropriate supervisory ethics entity, the official transfers, without restriction, control and management of private assets to an independent trustee who may not communicate information about the identity of the holdings in the trust to the official. The trust is considered “blind” because eventually, through the sale of transferred assets and the purchase of new ones, the public officer will be shielded from knowledge of the identity of the specific assets in the trust. Without such knowledge, conflict of interest issues would be avoided because no particular asset in the trust could act as an influence upon the official duties that the officer performs for the Government.

The Use of Blind Trusts by Federal Officials

Both of those documents were written by the same Legislative attorney, FYI.

The problem with one's own children is two-fold:

1. Prohibition on communication about the assets. The claim that family members are not going to discuss, basically, the disposition of family assets is simply not plausible. With a truly independent trust manager, there aren't inherent conflicts of interest or pressure to violate this requirement that comes with being a child of the owner of the assets.
2. The independent trust manager (again, independent) must not have a personal financial stake in the assets. Children clearly do, both short term, possibly, and as eventual heirs to an estate.

NOTE: My answer deals specifically with whether immediate family members could be in charge of what was considered a "blind trust," not whether regulations require it be done for President.

Answer 2

The rules referred to above have an explicit disclaimer that they do NOT apply to the President or Vice President, except for the specific clauses dealing with giving or receiving gifts.

From 2635.102 Definitions clause (h):

Employee means any officer or employee of an agency, including a special Government employee. It includes officers but not enlisted members of the uniformed services. It includes employees of a State or local government or other organization who are serving on detail to an agency, pursuant to 5 U.S.C. 3371, et seq. For purposes other than subparts B and C of this part, it does not include the President or Vice President

So the answer is, the President is under no legal obligation at all to make any particular arrangements with respect to their finances. The only constraint would be whether or not they care about appearing corrupt to the voting public.

Answer 3

"What ethics rule is O'Brien referring to?"

Code of Federal Regulations, Title V, §2634.401

http://www.ecfr.gov/cgi-bin/text-idx?node=pt5.3.2634&rgn=div5#sp5.3.2634.d

Two characteristics of the qualified trust assure that true “blindness” exists: the independence of the trustee and the restriction on communications between the independent trustee and the interested parties. In order to serve as a trustee for an executive branch qualified trust, an entity must meet the strict requirements for independence set forth in the Ethics in Government Act and this regulation. Restrictions on communications also reinforce the independence of the trustee from the interested parties. During both the establishment of the trust and the administration of the trust, communications are limited to certain reports that are required by the Act and to written communications that are pre-screened by the Office of Government Ethics. No other communications, even about matters not connected to the trust, are permitted between the independent trustee and the interested parties.

Code of Federal Regulations, Title V, §2634.405

... a proposed trustee is independent if:

(1) The entity is independent of and unassociated with any interested party so that it cannot be controlled or influenced in the administration of the trust by any interested party;

(2) The entity is not and has not been affiliated with any interested party, and is not a partner of, or involved in any joint venture or other investment or business with, any interested party; and

(3) Any director, officer, or employee of such entity:

(i) Is independent of and unassociated with any interested party so that such director, officer, or employee cannot be controlled or influenced in the administration of the trust by any interested party;

(ii) Is not and has not been employed by any interested party, not served as a director, officer, or employee of any organization affiliated with any interested party, and is not and has not been a partner of, or involved in any joint venture or other investment with, any interested party; and

(iii) Is not a relative of any interested party.

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Is this a rule that requires the president to put his assets in a blind trust?

No. This is a specification of a "qualified blind trust".

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However, there is a rule that federal employees must, when facing possible conflict of interest, either disqualify themselves from that issue, or divest (a qualified blind trust can fulfill the divestment requirement).

But The President and Vice President are exceptions to the rule.

Code of Federal Regulations, Title V, §2635.102

http://www.ecfr.gov/cgi-bin/text-idx?rgn=div5;node=5:3.0.10.10.9#se5.3.2635_1102

Employee means any officer or employee of an agency, including a special Government employee...For purposes other than subparts B and C of this part, it does not include the President or Vice President.

U.S. Code Title 18 Chapter 11 § 202 - Definitions

Except as otherwise provided in such sections, the terms “officer” and “employee” in sections 203, 205, 207 through 209, and 218 of this title shall not include the President, the Vice President, a Member of Congress, or a Federal judge.

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The reasoning behind excusing the President is that, requiring him to disqualify himself, could prevent him from fulfilling his constitutional duties.

Answer 4

The claim is false It clearly allows for of-majority age children. Link, pages 30-31, Standards of Ethical Conduct for Employees of the Executive Branch Final Regulation Issued by the U.S. Office of Government Ethics

The rule is 2635.402 Disqualifying financial interests, subsection (b) Definitions. Subpart (2)

Imputed interests. For purposes of 18 U.S.C. 208(a) and this subpart, the financial interests of the following persons will serve to disqualify an employee to the same extent as if they were the employee’s own interests:

(i) The employee’s spouse;

(ii) The employee’s minor child;

(iii) The employee’s general partner;

(iv) An organization or entity which the employee serves as officer, director, trustee, general partner or employee; and

(v) A person with whom the employee is negotiating for or has an arrangement concerning prospective employment. (Employees who are seeking other employment should refer to and comply with the standards in subpart F of this part).

The law nor the ethical code don't specify that a blind trust is mandatory. However, most lawyers view it as a practical way to deal with the provisions of this code spec (the parent of the one above):

Statutory prohibition. An employee is prohibited by criminal statute, 18 U.S.C. 208(a),from participating personally and substantially in an official capacity in any particular matter in which, to his knowledge, he or any person whose interests are imputed to him under this statute has a financial interest, if the particular matter will have a direct and predictable effect on that interest

A blind trust virtually guarantees accordance with this provision. Rather than evaluating every policy, action, and statement the President may or will make, some of which could be very tangential and give the optic of corruption, all modern day Presidents have opted for the simple convenience of the Blind Trust.

Answer 5

Leaving businesses to be run by one's own children is not a blind trust at all, but as to the question of whether a President can do that, the answer is yes. No law compels him to sell his assets or recuse himself from decisions.