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The Economic Structure of Trusts: Towards a Property-based Approach

Author

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  • Lau, M. W.

    (Director, Chinese Estates Holdings Limited, Hong Kong)

Abstract

This book provides an economic account of why trusts exist and how trust law should be shaped. The trust is a key legal institution in the common law world but it has been neglected by the law and economics community until recently. Borrowing theories and doctrines from corporate law and economics, scholars have variously analysed and described the trust as a tripartite contract, a nexus of contracts, and even a legal entity. These obligational approaches overlook the unique features of trusts for which corporate legal theories have no explanation. Most importantly, they fail to account for the nature of the beneficiary's interest in the trust property. This book presents an original analysis of the common law of trusts, arguing that trust law is about the trust property and the principal parties' relationships with it. At the same time it questions recent trends in trust law, especially those in offshore jurisdictions. Exotic developments such as non-charitable purpose trusts, settlor-retention of wide powers, and generous trustee exemption clauses have become the new normal and, coincidentally, draw analytical support from obligational accounts. It develops an analysis of trusts from a proprietary perspective, and applies the property-based approach to the economic analysis of trusts - explaining the economic benefits of trusts as an extension of the law of property. It also demonstrates how, once trusts are properly understood as property, it becomes obvious why these novel developments can only be for the worse, and should be reversed.

Suggested Citation

  • Lau, M. W., 2011. "The Economic Structure of Trusts: Towards a Property-based Approach," OUP Catalogue, Oxford University Press, number 9780199602407.
  • Handle: RePEc:oxp:obooks:9780199602407
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    References listed on IDEAS

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    1. Steven Shavell, 2002. "Law versus Morality as Regulators of Conduct," American Law and Economics Review, American Law and Economics Association, vol. 4(2), pages 227-257.
    2. Patrick Schmitz, 2001. "The Coase Theorem, Private Information, and the Benefits of Not Assigning Property Rights," European Journal of Law and Economics, Springer, vol. 11(1), pages 23-28, January.
    3. Alchian, Armen A & Demsetz, Harold, 1972. "Production , Information Costs, and Economic Organization," American Economic Review, American Economic Association, vol. 62(5), pages 777-795, December.
    4. Alan Schwartz & Robert Scott, "undated". "Contract Theory and the Limits of Contract Law," Yale Law School John M. Olin Center for Studies in Law, Economics, and Public Policy Working Paper Series yale_lepp-1011, Yale Law School John M. Olin Center for Studies in Law, Economics, and Public Policy.
    5. Shavell, Steven, 1991. "An Economic Analysis of Altruism and Deferred Gifts," The Journal of Legal Studies, University of Chicago Press, vol. 20(2), pages 401-421, June.
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    Cited by:

    1. Sumanjeet, 2015. "Institutions, Transparency, and Economic Growth," Emerging Economy Studies, International Management Institute, vol. 1(2), pages 188-210, November.

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