Trust and Estate Lessons From the Murdochs

Rupert Murdoch Stopped from Changing His Irrevocable Trust in Favor of His First Son

Nonagenarian media mogul Rupert Murdoch’s campaign to change his family’s irrevocable trust to give his son, Lachlan, control of his multi-billion-dollar news empire has hit a wall. Earlier this month, according to a New York Times report based on a sealed document, a probate commissioner in Reno, Nevada, rejected Rupert's changes.

At age 93 and married to his fifth wife, Rupert Murdoch’s colorful and controversial career kicked off with the inheritance of his father’s Australian newspapers. In part leveraging the power of sensational journalism, he famously grew the business dramatically and globally, acquiring publications like News of the World, The Sun, The Times, and The Sunday Times in the United Kingdom and the New York Post and the Wall Street Journal. Murdoch would also famously go on to establish the highly influential Fox News network.

Despite his meteoric success in the world of publishing and journalism, critics say he did so while utterly debasing the profession. The story of his news portfolio is pocked with scandals, like the hacking and bribery allegations that would take down News of the World and the $787 million settlement of the defamation suit brought by Dominion Voting Systems that would rock Fox News, if only temporarily.

Sensational Succession

Murdoch has six children, Prudence, Elisabeth, Lachlan, James, Grace, and Chloe. The dynamics of the Murdoch family have been tumultuous particularly when it has come to the succession of his media conglomerate – inspiring what has been described as a “funhouse mirror,” HBO’s “Succession.”

To ensure the mission of Fox News and other properties would survive him, Murdoch established a trust in 1999 while divorcing his second wife, Anna dePeyster, Scottish-born novelist and journalist, and mother to Elisabeth, Lachlan, and James.

The trust's structure, designed to balance power among his heirs, sparked power struggles and legal battles instead. Conflict erupted most recently when Rupert moved to amend the trust to ensure his elder son Lachlan would have control of Fox News and News Corp.

Murdoch's argument for the amendment was based on his belief that Lachlan was best suited to maintain the “conservative” editorial flair of Fox News, which he deemed crucial to the company's success and the financial well-being of the trust beneficiaries. However, the trust's irrevocable nature made this amendment challenging. It could only be amended through a Nevada probate court proceeding during which Murdoch had to demonstrate the change was in the best interest of all beneficiaries.

The ensuing legal battle pitted Murdoch's other children against him and Lachlan. The children argued that the amendment was not in the best interest of all beneficiaries and that it unfairly favored Lachlan. The court ultimately ruled against Murdoch, finding that Rupert and Lachlan had acted in bad faith by attempting to manipulate the trust to consolidate control.

This ruling underscores the complexities and potential pitfalls of estate planning, particularly in blended families with significant assets.

What can we learn from the Murdochs?

The Murdoch family conflict offers several lessons for estate planning. Here are just a few. 

• Know that, as the name suggests, irrevocable trusts are difficult to amend. It's crucial to ensure that a trust reflects the settlor's goals and purposes from the outset. There are limited ways to change an irrevocable trust, but each method is complex and typically involves legal proceedings. Even with his astronomical wealth and access to legal talent Rupert was not able to amend his family's trust to favor Lachlan. At least not yet. 
• Know that any change to an irrevocable trust could affect family relations. Naomi Cahn is a law professor at the University of Virginia School of Law. “To be sure,” she wrote recently, “everyone might agree to go to court to change the trust, which could improve relationships. That obviously is not what happened [in the Murdoch matter]."
• Don’t underestimate the impact of blended family dynamics. Careful consideration of asset disposition is crucial if you wish to avoid conflicts among heirs.
• Expect conflict when you don’t plan for equal treatment. Rupert’s attempt to change his family trust and manipulate his plans to favor Lachlan – primarily over his position in the company – ignited the family’s feud.
• Expect the unexpected. No estate plan can account for every possible eventuality. Conflict can arise when beneficiaries may not agree with or follow the settlor's intentions, opinions, decisions, values, or political views. As in the case of the Murdochs, several of his children said Rupert’s actions were not in their best interest and were conducted in bad faith. “[S]etting up an irrevocable trust means preparing for events in the future,” wrote Professor Cahn. “That might mean building in lots of flexibility for unanticipated circumstances so the family does not need to go to court. But even with the best legal estate planning advice available, things might still go wrong.”

These lessons highlight the importance of clear communication, fair treatment, and professional guidance in estate planning to avoid conflicts and ensure a smooth transition of assets.

Certain life events – like changes in business strategy or divorce and remarriage (no matter how many times you do it) – demand that estate planners work with clients to adjust their estate plans. Unless, perhaps, you are sitting atop a multibillion-dollar conglomerate, when matrimony devolves into acrimony it can drain the assets of your estate. To help mitigate such risk read our recent post, Divorce Need Not Ignite Estate Litigation, But Too Often It Does  by Amy L. Gostanian and Carl Jones of The Estate Lawyers. They discuss revocation upon divorce, joint tenancy, ademption and abatement, and estate modification. We hope it helps you think through ways to execute smooth transitions of family assets even when families don’t stay together.  Read it now.