Fox feud: What the Murdoch saga teaches us about irrevocable trusts
The Murdoch family remains embroiled in a high-stakes legal battle over control of its media empire, including Fox News and The Wall Street Journal.
At the center of the dispute is Rupert Murdoch’s effort to change the terms of a decades-old irrevocable trust.
Differences in politics and business strategy have emerged, complicating the Murdoch legacy.
The Murdoch Family Trust, created in 2006, gives Rupert Murdoch control over the business until his death, after which his four eldest children will receive equal voting shares.
But differences in politics and business strategy have emerged, complicating the Murdoch legacy.
Rupert Murdoch recently attempted to amend the terms of the trust to ensure his eldest son, Lachlan, controls family voting rights when he dies.
But altering an irrevocable trust isn’t as simple as filing some paperwork; it requires court approval and must be shown to benefit all heirs.
A Nevada judge rejected Murdoch’s petition in December, although news reports suggest Murdoch plans to appeal.
The basics: What is an irrevocable trust?
An irrevocable trust is one that, once established, cannot easily be changed or dissolved by the person who created it, known as the settlor.
An irrevocable trust is one that, once established, cannot easily be changed or dissolved by the person who created it, known as the settlor.
These trusts are often used in estate planning for their tax benefits and asset protection features.
However, the rigid nature of irrevocable trusts also means that once you establish one, you’re typically locking in the terms and beneficiaries for good.
Estate planning lessons from the Murdoch case
1. Irrevocable doesn’t always mean unchangeable: Despite the name, irrevocable trusts can be modified, but doing so requires navigating significant legal challenges.
In Murdoch’s case, changing the trust involves demonstrating that the amendment benefits all heirs.
2. Plan for family dynamics: The trust was created after Murdoch had two additional children with his third wife.
It grants his youngest daughters an equal financial stake but not the voting rights their older half-siblings will receive.
Those with blended families or younger children may benefit from drafting flexible terms that accommodate future additions or evolving relationships.
Families should anticipate possible changes in dynamics and plan accordingly.
Those with blended families or younger children may benefit from drafting flexible terms that accommodate future additions or evolving relationships.
3. Be realistic about beneficiaries’ values: The Murdoch dispute centers on concerns that Lachlan’s siblings could shift the media brands’ editorial stance or alter company strategy.
Murdoch argued that a lack of consensus could hurt profitability, and that granting voting control to Lachlan would be financially beneficial to all heirs — an argument the judge ultimately rejected.
This scenario illustrates that settlors can’t control heirs’ values or future choices.
Trusts should aim to balance flexibility with clear intentions, ensuring the settlor’s wishes are respected as best as possible, even as circumstances change.
When irrevocable trusts make sense
Murdoch family drama aside, irrevocable trusts can provide significant benefits in the right situations.
They can be used to protect assets from creditors, reduce estate taxes, and ensure long-term care for a loved one with special needs.
By locking in terms, they can help safeguard a family’s financial future and minimize tax liabilities.
However, for the trust to work as intended, careful planning is required. Take the time to anticipate future changes, consider family dynamics, and draft clear instructions that can stand the test of time.
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Be aware of 2025
estate tax changes
Estate tax planning is at a critical juncture in 2025, with implications for high-net-worth individuals and their beneficiaries. The cornerstone of these potential changes lies in the Tax Cuts and Jobs Act, implemented during the Trump administration in 2017.
The TCJA significantly increased the federal gift and estate tax exemption, allowing individuals to transfer more wealth without incurring federal taxes. The current exemption stands at $13.99 million per person and is set to sunset at the end of 2025. Without congressional action, the exemption is projected to revert to approximately $7 million.
While there’s some hope for an extension under the current political climate, nothing is certain. The good news is that the IRS won’t penalize gifts made under today’s higher limits even if the exemption drops later.
Given these upcoming changes, wealthy individuals should talk to their estate planning attorneys soon to make the most of the current higher limits.
Portability
A five-year window for late portability elections remains in effect, allowing a surviving spouse to use any unused portion of their deceased spouse’s federal estate tax exemption.
For example, if a person dies in 2025 having used only $5 million of their $13.99 million exemption, their surviving spouse can “port” or transfer the unused $8.99 million to themselves, adding it to their own exemption amount.
If your spouse died in 2021 and you didn’t file for portability then, you would still have until 2026 to make this election and claim their unused exemption amount. With the potential reduction in the estate tax exemption coming in 2026, having access to a deceased spouse’s unused exemption could be an important planning tool.
Annual exclusion increased
As of Jan. 1, 2025, individuals can now give up to $19,000 annually per recipient, without incurring gift taxes (double to $38,000 for married couples). That represents a $1,000 increase per recipient over the 2024 limit. The annual exclusion allows these gifts to be made without tapping into lifetime exclusion amounts.
Required Minimum Distributions (RMDs)
Beginning this year, most beneficiaries with an inherited IRA must start taking annual required RMDs in 2025 if the original account holder had already reached the “required beginning date” for RMDs during their lifetime. The 10-year rule also applies, and beneficiaries need to deplete the account within 10 years from inheritance.
As a reminder, for those with qualified retirement accounts, the required beginning date for RMDs is April 1 after you reach age 73. As of 2024, investors with a Roth 401(k) or a Roth 403(b) are no longer subject to RMDs.
The penalty for missing an RMD can be as much as 25 percent of the missed withdrawal, so it’s a good idea to consult with your estate planning attorney to ensure you meet all RMD requirements and deadlines.
Mass. court rules witness affidavit
does not trigger will’s
‘no contest’ clause
The Massachusetts Appeals Court has held that a beneficiary who provided an affidavit supporting his brother’s will contest did not forfeit his inheritance under the will’s “in terrorem” clause.
The decision in In re Estate of William F. McLoughlin provides some guidance on the scope and limitations of these increasingly common provisions.
Also known as “no contest” clauses, in terrorem provisions are designed to discourage beneficiaries from challenging a will by threatening forfeiture of their inheritance if they do so.
For example, suppose Mark had an estate valued at $2 million and, in his will, left $1.75 million to his daughter, Ami, and $250,000 to his son, Ray. Ray wants to dispute the will, believing he’s entitled to a larger share. But Mark’s will had a “no contest” clause stipulating that should any heir contest the will, their share is to be distributed to the other beneficiaries (i.e., Ami would get all $2 million).
The ‘McLoughlin’ decision
In the Massachusetts case, the decedent, William F. McLoughlin, left his assets to five of his six children. William Jr., who was disinherited, attempted to challenge his father’s will, alleging that he suffered from Alzheimer’s and that other siblings had isolated and manipulated him. Sean, one of the other sons, ultimately filed an affidavit on his brother’s behalf.
The will’s in terrorem clause specified two triggers for forfeiture: (1) contesting the will’s probate or validity, or (2) instituting or joining any proceeding to contest the will’s validity. While the trial court found that Sean’s affidavit triggered the clause, the Appeals Court disagreed.
The court distinguished between being a party to a will contest and merely serving as a witness. It found this protection extends to voluntary witnesses (as Sean was), not just those who are subpoenaed. The court emphasized that public policy favors allowing interested parties to fully test a will’s validity, particularly in cases involving potential undue influence or diminished capacity.
General guidance
In terrorem clauses are designed to protect your wishes and prevent family from litigating your estate after you are gone. These clauses are enforceable to varying extents, depending on the state. Some states have exceptions for legitimate challenges.
When drafting an in terrorem clause, consider what dollar amount could provide an effective deterrent to likely challengers. In our hypothetical example, Ray stands to lose $250,000 — a not insignificant sum — by challenging his father’s will.
Consult an attorney to discuss your unique situation.
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Montana Supreme Court rules cellphone video cannot serve
as valid will
The Montana Supreme Court has held that a cellphone video recording cannot be admitted to probate as a valid will, even when it clearly expresses testamentary intent.
The decision in In re Estate of Jesse L. Beck highlights tension between traditional will formalities and modern digital communications.
Four days before his death in a motorcycle accident, Jesse Beck recorded a video on his phone stating his wish to leave all his possessions to his brother, Jason Beck.
The court rejected Jason’s argument that the statutory phrase “document or writing” was meant to encompass non-written formats like video recordings.
After Jesse’s death, his daughter Alexia filed for informal appointment as personal representative in intestacy.
Jason then petitioned to have the video admitted to probate as Jesse’s will under Montana state law, which allows certain defectively executed documents to be treated as valid wills if clear and convincing evidence shows the decedent intended them as such.
Court’s analysis
The central issue was whether a video recording could qualify as a “document” under the statute.
The court rejected Jason’s argument that the statutory phrase “document or writing” was meant to encompass non-written formats like video recordings.
The court emphasized several key points:
• No state has legislatively authorized or judicially approved non-written video wills under the Uniform Probate Code.
• The statute’s purpose is to excuse “harmless” errors in executing written documents, not to authorize entirely new forms of testamentary disposition.
• The video failed to comply with any of the formal will requirements; it was not written, signed or witnessed.
• Even the proposed Uniform Electronic Wills Act, which aims to modernize estate planning, requires wills to be “readable as text” when signed.
Individuals are advised that valid wills must be in written form, properly signed, and witnessed according to state law requirements.
An experienced estate planning attorney can guide you through the proper execution of a will that meets all statutory requirements and effectively expresses your intentions.
QTIP trusts: Safeguarding the future for blended families
Here’s an all-too-common scenario: George dies leaving his estate to his beloved second wife, Jane. When Jane dies without a will, her estate (including everything she inherited from George) passes to her biological children via probate.
As a result, inadvertently or otherwise, George’s own biological children have been cut out of their father’s estate.
When love brings separate families together, it can be a beautiful thing. But these unions can also create unique estate planning challenges.
While the surviving spouse receives income from the trust’s assets, the original creator of the trust maintains control over how the assets are distributed after their spouse’s death.
A QTIP (Qualified Terminable Interest Property) trust can be a valuable tool to ensure that your spouse and children (both biological and stepchildren) are provided for in a way that reflects your wishes.
What is a QTIP trust?
The primary purpose of a QTIP trust is to provide income to the surviving spouse for their lifetime.
While the surviving spouse receives income from the trust’s assets, the original creator of the trust (the “grantor”) maintains control over how the assets are distributed after their spouse’s death.
That allows the grantor to ensure that their assets are passed on to their desired beneficiaries, such as children from a previous marriage.
Here are the key features of a QTIP trust:
• Income provision: The surviving spouse receives income from the trust’s assets during their lifetime.
• Control over principal: The deceased spouse retains control over how the trust’s principal is ultimately distributed, ensuring that children from previous relationships receive their intended inheritance.
• Estate tax benefits: For high-net-worth individuals, QTIP trusts may offer estate tax benefits, deferring taxes until the death of the surviving spouse.
Detailed planning can help account for everyone’s interests and minimize potential conflicts. Work with an estate planning attorney to craft a QTIP trust that reflects your family dynamics and financial goals.
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