Chapter

The Economic Structure of Trusts

M. W. Lau

in The Economic Structure of Trusts

Published in print January 2011 | ISBN: 9780199602407
Published online May 2011 | e-ISBN: 9780191725203 | DOI: http://dx.doi.org/10.1093/acprof:oso/9780199602407.003.0009
The Economic Structure of Trusts

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This chapter offers a property-based economic account of trusts. It explains the various functions of property and their limitations. Trusts can be understood as a functional extension of property. A major limit of property is that although the exclusion strategy is cheap, it is very blunt and not suitable for fine-tuned resource sharing arrangements. In this respect, it argues that trusts uniquely use the governance strategy to achieve effective exclusion against the trustee and other non-beneficiaries. Trust law is also unique in that its main focus is not on individuals. Trust law is asset- and wealth-centric in that its doctrines promote efficient resource use and protects beneficiaries' wealth, rather than their interests in specific assets. This chapter concludes that, ultimately, trusts are still second-best to property and beneficiaries must be able to transition from holding intangible wealth to owning tangible things.

Keywords: property; exclusion; governance; wealth; value; efficiency; Thomas Merrill; Henry Smith

Chapter.  13331 words. 

Subjects: Trusts Law

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