Legal scholars who care about how law creates wealth and power cannot afford to disregard the trust. As Katharina Pistor mentions in her recent book, The Code of Capital, the trust stands out as one of Anglo-American law’s “most ingenious modules for coding capital.” Trusts are a longstanding component of the “feudal calculus” that Pistor shows us is still “alive and kicking” in our financial regulation. Since their inception in the early eleventh-century in England, trusts have been essential instruments in the great and continuing quest to preserve and protect family wealth.
Trusts have always played a central role because they partition assets, thereby confusing the question of true ownership. That is to say, because trusts divide legal and equitable ownership, the real owner of the assets – the beneficiary – doesn’t have legal title to the assets and the legal owner – the trustee – doesn’t have any real rights to the property. In this way, trusts magically code their managed wealth as obscure and unavailable, without a true owner who can be held accountable for debts and obligations. As Roger Cotterrell pointed out some thirty years ago, “[t]he trust provides a way of freeing the property owner from constraints which the ideology of property otherwise imposes on her or him through its logic.” Accordingly, trusts have helped high-wealth families avoid unwanted taxation, shelter assets from surviving spouses, circumvent all manner of creditors, and protect family fortunes from spendthrift children.