Trust Beneficiaries Archives

Succession drama for Rupert Murdoch trust

February 26, 2025

How would it play out in New Zealand?

The critically-acclaimed TV show Succession was loosely based on the trials and tribulations of the wealthy media mogul, Rupert Murdoch and his family. Rupert Murdoch controls Fox News and other influential news publications through the US-based Murdoch Family Trust, which he settled in 1999 after his divorce from his second wife, Anna.

Murdoch Family Trust

The Murdoch Family Trust is an irrevocable trust which owns large shareholdings in various media enterprises. Many American trusts are established as ‘revocable’ trusts, but this trust was settled as an ‘irrevocable’ trust, which means its terms are very difficult to change. They could only be changed by Rupert (the settlor) if he acted in good faith and if the changes were beneficial to the beneficiaries.

The trust’s beneficiaries are Rupert’s children. Different children were set to receive different rights on Rupert’s death. His oldest four children – Prudence, Lachlan, James and Elisabeth – would each receive 25% of the voting rights in relation to the media companies. Rupert’s youngest two children would receive equal shares of the value of the trust’s assets, but they would not have any voting rights.

Some years ago, Rupert became concerned at the different political views amongst his children. Lachlan most closely shared Rupert’s views, but Prudence, James and Elisabeth were thought to be more liberal. Rupert attempted to change the terms of the trust so that after his death, Lachlan, would have sole voting rights and, therefore, more control over the media entities.

The dispute went to court in the state of Nevada. Rupert and Lachlan argued that it was in the interests of family harmony that the terms of the trust be changed and Lachlan given control on Rupert’s death. Prudence, James and Elisabeth argued that it was not in their interests to lose control. The court found that the attempt to change the terms of the trust was not in the interests of the beneficiaries and that it was a ‘carefully crafted charade.’

Rupert and Lachlan say that they will appeal the decision but, for now, the terms of the trust remain in force.

What would this look like in New Zealand?

If something similar happened in New Zealand, this scenario would look very different from a trust law perspective.

Irrevocable trusts are not generally used in New Zealand; almost all trusts, once settled, exist from that point onward. However, our trusts are usually very flexible. Even if a trust cannot be revoked, it can usually be resettled, varied, or distributed early.

If Rupert Murdoch had settled a trust in New Zealand, it would probably give him discretionary powers to benefit his children during his lifetime. On his death, the trust assets would be divided between his children (or transferred to new trusts for each of them).

Many New Zealand trusts can be resettled onto a new trust with different terms (and sometimes with different beneficiaries). As long as the resettlement is genuinely for the benefit of at least one of the beneficiaries, it is often permitted, even if it is detrimental to others.

If Rupert wanted to significantly change the terms of the trust, and had a resettlement power, he may be able to move the trust assets to a new trust. However, tax problems often arise on resettlement, particularly with commercial assets, so resettlement may not be a good option.

Most New Zealand trusts can be varied, but variation powers are often limited to the terms of the trust relating to management and administration. They cannot usually be used to change the beneficiaries or their entitlements. A variation power might not help Rupert achieve his goals.

New Zealand trusts usually give trustees discretionary powers to distribute income and capital early. If Rupert was a trustee, he may try to transfer the voting rights to Lachlan early – before Rupert’s death. Many New Zealand trusts would allow this, although it would depend on the terms of the trust and how much discretion the trustees were given.

Conclusion

The New Zealand trust landscape is very different to that in America. Our trusts are often more flexible than an American-style irrevocable trust. If the Murdoch Family Trust had been settled in New Zealand, Rupert might have found a way to make the changes he wanted. It is also, however, possible that the terms would not have permitted him to make changes at all.

New Zealand trusts can be used for many purposes and drafted with a great deal of flexibility, or very little flexibility. It depends on the terms of the trust used at the outset when the trust is settled. Each family’s needs will be different.

The Murdoch case illustrates how important it is to get things right from the outset to protect the beneficiaries from someone trying to make unexpected changes later.

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Copyright, NZ LAW Limited, 2022. Editor: Adrienne Olsen. E-mail: [email protected]. Ph: 029 286 3650

Refusing an inheritance

September 11, 2023

Amanda Leahy

Estate, Trusts

What options does a trustee have?

What is the trustee of an estate supposed to do when a beneficiary will not accept their inheritance?

This was the question faced by Mr Holland, executor and trustee of the estates of Margaret Glue and her husband, Ian Glue.^[1] Margaret died in 2005, leaving a life interest in her estate to her husband Ian, and her remaining estate to her two sons. Ian died in 2009, also leaving his estate equally to his two sons, David and John.

Best efforts to contact beneficiary

John received his inheritance shortly after Ian’s death in 2009; John died in 2019. David, however, was unable to be contacted, despite Mr Holland’s efforts to contact him for well over a decade. His inheritance was worth approximately $300,000 as at August 2022. Mr Holland had written to David advising him of his inheritance and asking for a bank account number so the funds could be deposited.

David lived in London. Mr Holland had arranged for a professional investigator to confirm that David lived at the address known to him, and where correspondence had been sent. It was confirmed that David did live at that address; this was understood to be local authority housing (similar to ‘council housing’ in New Zealand).

Actively avoiding contact?

There was a suggestion that David may have wished to avoid receiving his inheritance as it could have disqualified him from living in that property. Welfare or social housing benefits are means-tested in many countries; it is common for these to become unavailable if a recipient’s assets exceed a certain threshold.

It is possible that David did not want to receive his inheritance because he thought he would be better off with stable and affordable housing, rather than receiving his inheritance that would then be dissipated on more expensive housing and eventually leave him in the same position. There was no specific evidence on the point, however, as David would not engage with the trustee, so this was only conjecture.

What next?

Mr Holland had held the inheritance for more than a decade and he wanted to be freed from his trustee obligations to David. Mr Holland applied to the High Court for an order^[2] asking for permission to distribute the inheritance to John’s children, on the basis that David was ‘missing’ and his entitlement should be disregarded. Mr Holland swore an affidavit that he had known Margaret and Ian Glue for many years, and they would have wanted their descendants to benefit from their estate. He thought that Margaret and Ian would have preferred that the beneficiaries of John’s estate (i.e. his children) receive the inheritance, than for the money to sit indefinitely in case David eventually decided to accept it.

The High Court noted that section 136 of the Trusts Act 2019 applied to beneficiaries who are ‘missing.’ It said that David was ‘decidedly not missing’; he could be found, but he simply would not engage with the trustee or accept his inheritance. Initially the court proposed that the money be paid to the Crown to be held in case David ever made a claim, but it was persuaded that this was not what Margaret and Ian would have wanted.

The High Court found that even though David was not missing, section 136 applied anyway because:

The trustee had taken reasonable steps to bring the inheritance to David’s attention, over more than 10 years
More than 60 days had passed since the trustee’s last attempt to contact David, and
In the circumstances, it was reasonable to disregard David’s position and direct that the inheritance be paid to John’s estate (and therefore to his beneficiaries), as though David did not exist.

The lessons in this case

While it is unusual for a beneficiary to fail to claim their inheritance, it can happen, and they may have good reasons for doing so. That can, however, make things difficult for an executor or trustee who is holding funds on their behalf.

This case is a good reminder that a trustee who is in this situation may have other options and will not be forced to hold the funds indefinitely.

^[1] Re Holland [2023] NZHC 464.

^[2] Under section 136 of the Trusts Act 2019.

Decision in ‘Alphabet case’ could change succession landscape

September 11, 2023

Amanda Leahy

Kids, Property, Relationships, Trusts

Significant issues raised

In June 2023, the Supreme Court heard the ‘Alphabet case.’ To understand the significance of what is at stake in this case, it is worth considering the facts that gave rise to the litigation and the High Court’s decision.

Abuse of A, B and C by Mr Z

Mr Z and Ms J married in 1958 and separated in 1981. They had four children: G (1960-2015), A (b 1961), B (b 1963) and C (b 1971).

Mr Z severely abused Ms J and the children physically, psychologically and sexually. A was repeatedly raped between the ages of seven and 13, but she did not disclose the abuse to anyone until 1983. She did not tell her mother until 1991. A was unable to face taking action against Mr Z.

Mr Z died in 2016 leaving an estate valued at $46,839. He had, however, settled a trust two years previously for the express purpose of preventing his family from “chasing” his assets, to which he had gifted his home and investments worth $700,000. The children were not beneficiaries of Mr Z’s estate or the trust; rather, the trust’s beneficiaries were the children of Mr Z’s former partner.

Children’s claims

That should have been the end of the matter because the Family Protection Act 1955 (FPA), that allows children to challenge their parents’ wills, only applies to assets a deceased owned in their personal names; it doesn’t apply to trust assets.

However, the children argued that their father owed them a fiduciary duty and, that because of the abuse, he continued to have obligations to them even after they became adults. They said that Mr Z had breached that duty when he gifted his home and shares to the trust in order to prevent his children from claiming against those assets under the FPA.

In the High Court

In the High Court,^[1] Justice Gwyn agreed with the children and said they could bring claims under the FPA against the assets that had been transferred to the trust.

The trustees of Mr Z’s estate and trust appealed to the Court of Appeal.

Court of Appeal divided over case

The Court of Appeal^[2] accepted that Mr Z owed a fiduciary duty to his children and that he breached that duty when he abused them. The issue was whether Mr Z continued to owe those fiduciary duties to his adult children at the time he gifted his assets to the trust.

The majority of the Court of Appeal judges disagreed; they said that the appropriate remedy for the breach of fiduciary duty was equitable compensation (and the children had run out of time to make that claim).

However, one judge said that in some circumstances the inherently fiduciary relationship between a parent and a child may continue after a child becomes an adult (for example, in the case of a severely disabled child).

The judge (who was in the minority, so their views don’t affect the final outcome) decided that A’s position, owing to the abuse she suffered, was analogous to that of a disabled child. Mr Z therefore had a continuing duty to take steps to remedy, as best he could, the enormous harm he inflicted on A, not only when she was living in his care, but also during her adult life. This meant he was required to protect her interests when considering gifting his principal assets to the trust, and failed to do so.

Decision awaited

The Supreme Court will tell us whether Mr Z owed a continuing fiduciary duty to A into her adult life because of the abuse he perpetrated on her. Many commentators believe that it is stretching the concept of a child/parent fiduciary duty too far.

If legal principles cannot evolve, however, a situation may emerge where extraordinarily meritorious claimants are left with no effective relief, simply because too much time has passed, and/or because their parent transferred their assets into a trust to prevent claims after they have died.

That raises two questions:

Should time count against people such as A, who have been so seriously abused by a parent?
Should parents be allowed to transfer their assets into a trust in order to prevent their children making claims after their death?

^[1] [2021] NZHC 2997.

^[2] [2022] NZCA 430.