Murdoch family’s ‘Succession’-style saga tests ability of irrevocable trust to be modified

Rupert Murdoch, the 93-year-old media mogul, attempted to modify his family trust to consolidate power in the hands of his chosen successor, his eldest son Lachlan Murdoch. This move involved the coverage priorities of Fox News and maintaining the family's control over their vast media empire. However, in a surprising turn of events in late 2024, a Nevada probate commissioner rejected Murdoch's bid, dealing a significant blow to his succession plans, according to numerous media reports.

The Murdoch Family Trust, established in 1999, assigned eight votes for decision-making over the family's media assets. Rupert Murdoch was granted four votes, while each of his four eldest children – Prudence, Elisabeth, Lachlan and James – received one vote. Upon Rupert's death, the trust stipulates that his votes are to be evenly divided among them, ensuring shared control. This structure has long been a source of tension within the family.

The proposed amendment to the trust would have disproportionately favored Lachlan, the CEO of Fox News and News Corp, at the expense of his siblings. Rupert Murdoch argued that granting Lachlan overarching control was essential to protect the commercial value of Fox News and maintain its editorial stance. However, James and Elisabeth Murdoch, known for their contrary editorial priorities, vehemently opposed the move, fearing it could cement a single viewpoint and alienate other stakeholders.

In a scathing 96-page opinion, Nevada Probate Commissioner Edmund J. Gorman Jr. described Murdoch's actions as a "carefully crafted charade." The commissioner concluded that both Rupert and Lachlan Murdoch had acted in "bad faith" in their efforts to amend the irrevocable trust. The ruling not only halted efforts to shift power dynamics within the Murdoch family but also left the future of the empire in a precarious balance.

The Murdoch family's struggle bears striking similarities to the fictional Roy family in "Succession." Both narratives revolve around aging patriarchs grappling with the complexities of transferring power and preserving their legacies. The real-life drama of the Murdochs, like the fictional Roys, highlights the intricate challenges that wealthy families face when dealing with succession and asset distribution.

One of the key lessons from both the Murdoch saga and "Succession" is the importance of clear communication and early planning in estate matters. The lack of open dialogue has often caused ripples within the Murdoch clan, much like the fictional Roy family. This is exemplified in the 2024 court battle, where the siblings found themselves at odds over the future of the family empire.

Another crucial aspect highlighted by both stories is the need for a well-structured succession plan. The sudden death of Logan Roy in "Succession" left Waystar Royco in a precarious position, much like how Rupert Murdoch's attempts to alter the trust have created uncertainty in his real-life empire. Such instability can be avoided with a well-documented and communicated succession plan.

The Murdoch case also underscores the importance of understanding the nature of irrevocable trusts. Once established, these trusts are designed to be difficult to modify, offering tax benefits at the cost of flexibility. Rupert Murdoch's attempt to amend the trust highlights the challenges that can arise when circumstances change or when the settlor's wishes evolve over time.

The term "irrevocable trust" might suggest that such a trust cannot be altered, but this is not entirely accurate. While changing an irrevocable trust is more challenging than modifying a revocable trust, there are several methods available to amend or modify an irrevocable trust under certain circumstances.

There are numerous reasons why modifying an irrevocable trust might be necessary or desirable:

• Changed family circumstances (births, deaths, marriages, divorces, etc.).
• Shifts in financial conditions.
• Evolving needs of beneficiaries.
• Updates to personal beliefs or estate planning goals.
• Changes in state or federal tax laws.
• Correction of drafting errors.
• Desire to change trustees or governance structure.
• Need to adapt to new investment strategies.

While irrevocable trusts are designed to be permanent, there are several methods available to modify them when circumstances warrant changes. These methods range from built-in provisions to legal procedures, each offering unique advantages and considerations. Understanding these options is crucial for trustees, beneficiaries and grantors who may need to adapt their trusts to evolving situations. Each of these methods offers a potential pathway to adapt an irrevocable trust, but they come with specific requirements and potential implications. Let's explore each option in more detail.

Here are five key methods to modify an irrevocable trust:

• Trust protector provision. Some modern trusts include a "trust protector" provision. This allows an independent third party to review and approve proposed modifications to the trust without court involvement.
• Decanting. Decanting involves transferring assets from an existing irrevocable trust to a new trust with more favorable terms. This method is available in many states but must be done carefully to avoid tax implications.
• Nonjudicial settlement agreements (NJSAs). Many states allow for modification through nonjudicial settlement agreements. This typically involves agreement among the trustee and all beneficiaries, sometimes including the grantor if still living.
• Judicial modification. When other methods are not available, petitioning the court for modification is an option. Courts may approve changes for the following reasons: if circumstances have changed significantly since the trust's creation; the trust's purpose is being undermined; all beneficiaries consent (in some cases); and the modification aligns with the settlor's original intent.
• Unanimous consent. In some jurisdictions, if all beneficiaries (and the settlor, if living) agree to a change, they can petition the court to modify the trust.

When considering modifications to an irrevocable trust, several important factors must be taken into account. First and foremost are the potential tax implications. Altering an irrevocable trust can have significant tax consequences, particularly if the changes affect the trust's tax status or the rights of beneficiaries. Such modifications may trigger gift taxes or impact existing estate tax planning strategies, potentially undermining the trust's original tax benefits.

Legal requirements also play a crucial role in the modification process. The procedures and allowances for changing irrevocable trusts vary considerably from state to state. Some jurisdictions have more permissive laws, offering greater flexibility in trust modifications. Delaware, for instance, is known for allowing extensive modifications with the grantor’s consent. This variability in state laws underscores the importance of understanding the specific legal landscape governing the trust in question.

Another critical consideration is the preservation of the trust's "material purpose." Courts and trustees are obligated to evaluate whether proposed changes align with or violate the fundamental intentions of the trust's creator. Modifications that significantly deviate from the settlor's original goals are less likely to receive approval. This requirement helps maintain the integrity of the trust and respects the settlor's wishes, even as circumstances change.

Lastly, the rights of beneficiaries must be carefully considered in any modification process. This includes not only current beneficiaries but also potential future beneficiaries, particularly in long-term or dynastic trusts. Balancing the interests of all beneficiaries can be complex, as changes that benefit some may adversely affect others. This consideration often adds layers of complexity to the modification process, requiring careful negotiation and potentially legal intervention to ensure fair treatment for all parties involved.

So, while irrevocable trusts are designed to be difficult to change, they are not entirely immutable. Various legal methods exist to modify these trusts when circumstances warrant. However, the process can be complex and potentially impact tax benefits or asset protection features of the trust. Therefore, any attempts to modify an irrevocable trust should be undertaken with careful consideration and professional guidance to ensure that the proposed changes align with legal requirements and the trust's original intent.

The Murdoch family trust dispute serves as a powerful reminder that even carefully structured estate plans can face significant challenges when family dynamics, business interests and changing circumstances collide. The case highlights several critical lessons for estate planning: the importance of clear communication among family members; the need for careful consideration when attempting to modify irrevocable trusts; and the potential consequences of failing to align proposed changes with the trust's original purpose.

While irrevocable trusts can be modified through various legal mechanisms, the Murdoch saga demonstrates that such changes require more than just the settlor's desire – they must be legally sound, properly executed and ideally supported by all stakeholders. The probate commissioner's rejection of Rupert Murdoch's proposed amendments underscores that even individuals with vast resources and sophisticated legal counsel must operate within established legal frameworks when attempting to modify trust arrangements.

For families engaged in estate planning, particularly those involving business succession, the key takeaway is clear: establishing a comprehensive, well-communicated plan early on, with careful consideration of potential future challenges, is far preferable to attempting significant modifications later. As both the Murdoch case and its fictional parallel in "Succession" illustrate, the intersection of family dynamics, wealth and power requires thoughtful planning that balances flexibility with the need for stable, enduring governance structures.