Tuesday, April 13, 2021
Eric A. Kades (William & Mary; Google Scholar), A New Feudalism: Selfish Genes, Great Wealth and the Rise of the Dynastic Family Trust:
Today’s record levels of economic inequality are infecting our future as the top 0.01% bequest vast wealth to their descendants. With the death of the Rule Against Perpetuities (RAP), this inequality has the potential to harden social class lines not just for a generation or two but forever. Although it may sound implausible, interviews with estate lawyers serving very high net worth clients reveal that some of the wealthiest tier of testators are already exploiting the RAP’s elimination, along with a tax loophole, to establish dynasty trusts that will financially empower their bloodline as long as it continues. Evolutionary biologists will not be surprised by this finding. Recent work in their field shows a universal and powerful human drive for high status descendants — a drive for “quality” progeny so powerful that it appears to trump the usual desire to maximize quantity of offspring. Coupled with the long history of dynastic family wealth in England, this science suggests that today’s wealthiest testators will utilize powerful modern legal institutions (e.g. well-developed laws of contract and trust; deep and efficient capital markets) to forge a new sort of trust that I dub a Dynastic Family Trusts (DFT). These DFTs will be larded with innovative provisions leveraging a founder’s wealth to maximize descendants’ status for generation after generation.
For those fearing the pernicious effects of concentrated wealth on democracy and equal opportunity, the rise of the DFT is alarming. Fortunately there is a very easy fix: simply reinstate the Rule Against Perpetuities. Given a race-to-the-bottom dynamic among the states, national legislation from Congress is necessary.