A legal feud is playing out in Nevada probate court over a family trust holding shares in one of the largest media empires in the world. Rupert Murdoch is fighting with his children to amend the terms of his irrevocable family trust, the vehicle through which Murdoch controls a roughly 40% stake in News Corp (which holds major newspapers such as The Wall Street Journal) and Fox Corp, in what is life imitating art imitating life (the HBO hit show Succession is rumored to take inspiration from the Murdoch family).
Irrevocable Trust
As the trust currently exists, voting control would pass to four of Murdoch’s children—Lachlan, James, Elisabeth and Prudence (his other two children have an economic interest in the trust but no voting control). However, late last year, Murdoch filed a petition to amend the terms of the trust and instead grant exclusive control to his eldest son Lachlan, who already took over as chair of Fox Corp and News Corp after his father stepped down last year. According to documents exclusively obtained by The New York Times, Murdoch is concerned that the other children aren’t aligned with his conservative views, and this deviation in political beliefs could potentially influence the company’s editorial direction, affecting its economic value. Murdoch’s desired modification of the trust would leave the three other children powerless.
In Good Faith
Per The Times, the trust only allows changes done in good faith to benefit all heirs. Murdoch plans to argue that granting exclusive control to Lachlan would protect the companies’ value and benefit all the heirs. The Nevada probate court will hold a hearing in September to determine whether Murdoch’s desired modification is in good faith. The three other siblings have joined forces to challenge the change, insisting that this isn’t what the “family had agreed” on when the trust was first set up in 1999.
“To demonstrate good faith, Murdoch will need to convince the court that he sincerely thinks the amendment is in the best interest of all the trust beneficiaries,” said Jennifer Campbell, partner at Karlin & Peebles. “Unless there’s evidence of a lack of good faith, it’s likely that the court will find that the good faith element is satisfied.”
“Proving a lack of good faith is challenging, but it’s possible,” explained Campbell. For example, the beneficiaries opposing the amendment may be able to undermine Murdoch’s position if they can show that he will personally benefit if the trust is amended as proposed. Another example is if the opposing beneficiaries can present evidence that Murdoch’s motivation in proposing the trust amendment is to play his children against each other or show that the trust amendment results from an otherwise undisclosed arrangement between Lachlan and Murdoch, added Campbell.
As for the “sole benefit of the trust beneficiaries” element, “Murdoch likely will argue that the value of unified, unquestionable, and uncontestable management will offset the diminished value caused by the loss of voting rights. However, it’s uncertain how the court will view that argument,” opined Campbell.
Battle for Control
Murdoch’s pinning of his children against each other is nothing new. It’s no secret that Murdoch expects his offspring to compete for his respect and control of the family empire. While Prudence, the eldest child, hasn’t shown much interest in the family business, James, Murdoch’s younger son, once seemed to be in the running to be the designated successor. He, however, has clashed with his father and older brother over political views, including criticizing the editorial content published by some of the family-owned media outlets (James has also spent millions to fund numerous Democratic-leaning causes). Elisabeth has previously worked for the family business but has gone in a different direction, co-founding a production company and starting a non-profit program.
When asked how estate planners typically handle situations in which a client is pinning their children against each other to compete for the family business, or just their love in general, Campbell explained that, “As lawyers, we advise our clients of the benefits, risks and costs of contemplated actions, but ultimately, the client decides the course of action to be undertaken. It appears that Murdoch’s primary goal is cementing his legacy and that he’s willing to incur the expense and family estrangement that’s inherent in pursuing that goal.”