Art often imitates life and the latest drama surrounding Rupert Murdoch demonstrates that. Most of the time, when an individual creates an irrevocable trust, they part with dominion and control over the assets, and it is difficult to change the terms. Not long ago, Rupert Murdoch filed a petition in Nevada probate court to change the terms of an irrevocable trust that was originally created in 1999.
Regular readers know that celebrity estates gone wrong often become the subject of this blog. Given the numerous sources that detail the consequences of failed Estate Plans, it surprises me that anyone, let alone a person with any degree of fame, would fail to implement a proper Estate Plan prior to their death. Sometimes, it’s because they died an untimely death and never created the plan or created a convoluted plan. Other times it’s because they neglected to update the plan as family circumstances changed. Finally, some famous individuals do not follow the required formalities for their Estate Plan. None of these excuses outweigh the benefit of creating an Estate Plan and reviewing it regularly. Simply put, none of us should leave our legacy to chance.
Rupert Murdoch may understand the importance of legacy better than most other famous people. Indeed, Murdoch expects his children to compete for his respect by vying for control of the family empire. This family dynamic served as the inspiration for the television show, Succession. Much like what happened in the show, the “heir apparent” to the family empire changes over time based upon that individual’s action or inaction in a particular matter. In the show, when a child disobeyed or angered Logan Roy, he made changes and often pitted his children against one another. According to sources, that’s exactly what’s happening now with the Murdoch family. Late last year, Murdoch filed a petition to amend the terms of an irrevocable trust that holds Murdoch’s approximately 40% interest in News Corporation (“News”) (which owns The Wall Street Journal) and Fox Corporation (“Fox”). According to documents obtained by the New York Times, Murdoch initiated the petition because of his concerns regarding the politics of some of his children. He worries that their beliefs could influence News and Fox and ultimately, negatively impact the economic value of the entities.
Murdoch created the trust at issue in 1999. According to the New York Times, upon Murdoch’s death, the terms of the trust give equal voting control of the entities in the trust to Lachlan Murdoch, James Murdoch, Elisabeth Murdoch, and Prudence Murdoch, four of Murdoch’s six children. In the petition, Murdoch seeks instead to grant exclusive control of the entities to his eldest son, Lachlan. Lachlan began running News and Fox last year when Murdoch retired and aligns with his father politically. Notably, James, Murdoch’s youngest son, has clashed with his father politically and has criticized editorial content published by the media outlets. If Murdoch wins this lawsuit, it will strip James, Elisabeth, and Prudence of any power to control News or Fox.
Murdoch’s desire to change the terms of the trust may not come to fruition. The New York Times reports that the terms of the trust only allow changes made in good faith and for the benefit of the heirs. Sources indicate that Murdoch plans to argue that giving Lachlan sole control of News and Fox will protect the value of the companies and benefit the heirs by putting control in the hands of just one child thereby preventing intrafamily squabbles. James, Elisabeth, and Prudence oppose the change and it’s unclear how the court will view the proposed modification given that three of four children would lose their voting rights. The hearing will occur in September.
Interestingly, we get to watch this battle unfold during Murdoch’s life. In many disputes involving the estate of a famous individual, the battle occurs after that person’s death. Here, it occurs at Murdoch’s behest during his life, which provides insight into his true intentions. Beneficiaries rarely have the opportunity to understand the underlying reason for a plan that deviates from expectations or that treats children differently. That isn’t the case here. Murdoch’s children know what he wants to do and why and will have the opportunity to oppose the proposed revision. Unfortunately, no matter how the case ends, it may cause irreparable damage to the family.
While fascinating, it’s unfortunate that this matter will play out on a public stage. The family is no stranger to the press, lawsuits, and publicity. Typically, when intrafamily litigation ensues, only the lawyers benefit. Litigation takes time, causes stress, and costs money. Thankfully for the Murdoch family, the dispute plays out now, rather than at Rupert Murdoch’s death. While it will undoubtedly hurt feelings, having it play out now may give the parties time to heal and potentially reconcile while everyone lives. It may also motivate them to settle the dispute privately. These public feuds provide great lessons for Trust and Estate attorneys willing to learn from them.
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