The Law of High-Wealth Exceptionalism
57 Pages Posted: 25 Jun 2019 Last revised: 24 Jun 2020
Date Written: June 18, 2019
No family is an island. But some families would like to be – at least when it comes to wealth preservation – and they depend on what this Article calls the law of high-wealth exceptionalism to facilitate their success. The law of high-wealth exceptionalism has been forged, over the years, from the twinned scripts of wealth management and family wealth law, both of which constitute high-wealth families as sovereign entities capable of self-regulation and deserving of exemption from the rules that govern ordinary-wealth families. Consequently, high-wealth families take advantage of complicated estate planning techniques and highly favorable wealth rules in order build walls around their family fortunes and construct bespoke governance systems. Hiding in plain sight, the law of high-wealth exceptionalism protects, privileges, and enables high-wealth families in their own particular form of organizational sovereignty.
The fact that high-wealth families operate according to their own rules might seem totally unconnected to the political lives and financial health of ordinary-wealth families. However, high-wealth exceptionalism intensifies old harms and creates new ones within the larger polity. To begin, the law of high-wealth exceptionalism increases systemic risk in financial markets, shifts tax burdens from high-wealth to lower-wealth families, and widens the wealth gap. Compounding these problems, high-wealth family exceptionalism facilitates the growth of a plutarchic and patrimonial system of government in which power is based on family wealth and privilege flows in a circuit between a small number of already exceptionally resourced families. Understanding how the law of high-wealth exceptionalism functions is, consequently, an important step in identifying hidden levers of wealth inequality and addressing the resulting democratic deficit.
Keywords: trust law, estate planning, wealth management, wealth transfer, high-wealth families, family office, family constitutions, family foundations, philanthropy, patrimony, patrimonialism, plutocracy
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