TaxProf Blog

Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Tuesday, May 16, 2017

Chang:  Inequality, Trusts And Estates, And Tax

Felix B. Chang (Cincinnati), Asymmetries in the Generation and Transmission of Wealth,  78 Ohio St. L.J. ___ (2017):

This Article assigns a redistributive role to the legal rules of trusts and estates. Unlike business law, trusts and estates has lagged in articulating a comprehensive theory on inequality. Consequently, income inequality is compounded intergenerationally as wealth inequality, with dire consequences for economic productivity and social stability. To move the discourse on wealth inequality, this Article explores the divergent approaches toward inequality in business law and trusts and estates.

Additionally, this Article recasts trusts and estates’ legal rules as wealth transfer mechanisms. Four categories of rules are implicated: (1) rules that interact with the tax system, (2) rules that govern relations between beneficiaries and creditors, (3) rules that govern relations between beneficiaries and trustees, and (4) rules that govern relations among beneficiaries.

More broadly, this Article contributes to three lines of scholarly debates. The first revolves around the propriety of drawing analogies between trust law and the law of enterprise organization. The second is whether legal rules or the tax system better effectuates redistribution. The third is whether legal rules should reflect our notions of fairness or welfare.

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It constantly amazes me that the realities of generational wealth transfer are lost in academia and among redistributionists. Every study I've observed in the last decade tends to show that, unless the wealth is properly fostered, it is generally greatly diminished or exhausted by the third generation from that individual or group of individuals that created the wealth.

Seems its always about the amorphous definition of fair and the need to exorcise wealth from its creator and the creator's intent.

Posted by: Tom N | May 16, 2017 3:46:11 PM

Any mention of redistribution cohabitating with a just system of laws is oxymoronic. Using the legal system to steal from one group of citizens to supposedly benefit another group (while those enforcing the transfer seem to benefit the most) should be shunned.

Posted by: ruralcounsel | May 17, 2017 4:22:44 AM