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The Economic Structure of TrustsTowards a Property-based Approach$
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M. W. Lau

Print publication date: 2011

Print ISBN-13: 9780199602407

Published to Oxford Scholarship Online: May 2011

DOI: 10.1093/acprof:oso/9780199602407.001.0001

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The Economic Structure of Trusts

The Economic Structure of Trusts

(p.137) 8 The Economic Structure of Trusts
The Economic Structure of Trusts

M. W. Lau

Oxford University Press

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

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