Legacy Law Blog

Rupert Murdoch, the Australian-American media proprietor and owner of Fox News, among many other companies, recently suffered a major legal setback at the hands of a Nevada probate commissioner.

The issue stems from Murdoch’s attempt to change the terms of his irrevocable family trust. That word – irrevocable – carries tremendous weight in this story. Often, when individuals establish an estate plan for themselves and their families, they will create a revocable living trust, which they can change any time they like. You don’t need court approval to amend a revocable trust. The same cannot be said for irrevocable trusts, however, which require the approval of a judge, for good cause, to change the terms.

In this case, Murdoch’s current irrevocable trust requires all four of Murdoch’s children – Lachlan, James, Elizabeth and Prudence – to share equally in the control of Murdoch’s properties after he passes away. However, Murdoch sought to change the terms of the trust and exclude the latter three children, leaving Lachlan in charge.

This post doesn’t venture into the political realm to discuss the differences among the siblings, but suffice it to say, Lachlan appears to be much more politically aligned with his father. Many commentators have argued that political considerations are the real underlying justification for the request, as opposed to legitimate fiduciary concerns for the shareholders.

Edmund Gorman, Jr., the Nevada probate commissioner under the local Reno district court, ultimately rejected the request. Gorman held a seven-day evidentiary hearing (essentially a trial) to allow both sides to present documentary evidence and witnesses and to argue their respective sides. In rejecting Murdoch’s request, Gorman’s written decision stated that Murdoch’s maneuvering was an act of “bad faith” and a “carefully crafted charade.” The case now moves to a district judge who will either ratify or reject the commissioner’s finding.

This case illustrates two important things: first, even the most carefully crafted estate plan is not bullet-proof. There is no perfect solution. People and situations change, and you can’t always foresee the evolution of family dynamics. Second, while irrevocable trusts are a valuable estate planning tool, they are complicated animals. They can be incredibly difficult, cumbersome and expensive to change.

In Michigan, absent an agreement between the parties, the process would have been largely the same as in Nevada. The attorneys for the grantor (the person creating the trust) would have filed a petition in the local county probate court. The judge would probably have ordered an evidentiary hearing. And the losing side could appeal the decision to the next highest court.

Despite the setback, the legal battle over Murdoch’s trust is far from over. In addition to potential appeals, Murdoch and Lachlan could attempt to buy out the other siblings’ shares. We will see how that plays out. Probate is often the intersection of business, family, tax, property and estate law. The Murdoch family trust is a case in point.