Crawford, Magical Thinking and Trusts (July 20, 2019) [Kaestner commentary]

Professor Bridget J. Crawford, Pace University School of Law, has made available for download her article, Magical Thinking and Trusts, to be published in the Seton Hall Law Review. The Abstract is as follows:

At a time of monumental economic inequality in the United States, wealthy individuals and their tax-motivated behavior have come under significant scrutiny from all corners. In 2019, the Supreme Court issued its first major ruling in over sixty years on the state income taxation of trusts. In North Carolina Department of Revenue v. Kimberley Rice Kaestner 1992 Family Trust, the Court declined to close what some critics consider to be a major loophole that benefits the trusts that wealthy individuals create for family members. This Article makes two principal claims — one interpretative and the other normative. The Article explains why the Court’s decision in Kaestner Trust is correct as a matter of law. Just as trusts themselves are a type of magical thinking — legal fictions made real by law — so, too, is the hope that the judicial branch can play an active role in limiting the use of trusts by the wealthy. Because judges cannot disregard centuries of trust jurisprudence, critics of family trusts have directed their attention mostly to the tax law. This Article suggests that reformation of the substantive law of trusts might help achieve reform, as well. 

Through the prism of a reimagined legal landscape for trusts — by engaging in a different exercise in magical thinking — one can differentiate those aspects of family trusts that serve salutary legal or social purposes from those that serve primarily to preserve and protect wealth. This analysis has important implications for the larger cultural conversation about trusts. Examining how trusts operate and considering what limitations, if any, a just society might impose on them opens the way for identifying allies in the effort to narrow the wealth gap. Reducing wealth inequality is crucial so that all people will have some means of pursuing their personal ideals of social, political and economic fulfillment. 

Crawford, Bridget J., Magical Thinking and Trusts (July 20, 2019). Seton Hall Law Review, Forthcoming. Available at SSRN:

To download full article, click Crawford, Magical Thinking and Trusts (July 20, 2019).

Click here to see a review of Crawford, Magical Thinking and Trusts, by Hayes Holderness on the Tax Prof Blog.

Posted by Lewis J. Saret, Co-General Editor, Wealth Strategies Journal..

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