How to ruin a family with one quick court case

Rupert Murdoch is trying to set his legacy using his family trust, and thousands of Australians are following in his footsteps. A year ago, the federal Treasury called out the growing number of trusts – and this year, the number of beneficiaries has grown by 200,000.

Murdoch is no longer an Australian citizen, so the rules are different – but the end game is the same. Fund your legacy. The New York Times this week revealed Murdoch is locked in a secret legal battle against three of his children over the future of the family’s media empire.

Rupert Murdoch is moving to ensure that his son Lachlan remains in charge of his empire.Credit: Getty Images

“If an autocrat who has spent 70 years telling everyone what to do, including the leaders of governments in democracies, decides he wants to push three of his adult children off his plane, of course he will do it. And to him, it will feel just like normal behaviour,” says Eric Beecher, a former editor in the Murdoch empire, whose new book, The Men Who Killed The News, will be published next week.

Now, it’s a combination of Succession, with a touch of Downton Abbey. Who gets to keep what and why does it matter?

Honestly, what is it with the wealthy? We’ve already had a similar drama play out with local wealth hounds, the Rineharts, with mother Gina pitted against her kids over zillions of dollars. The University of Melbourne’s Katy Barnett, a law professor and an expert on trusts, says these cases give us an insight into the actions of high-net-worth individuals. As she says, the Rinehart case has gone on for years. It’s still not resolved. And what about Vanessa Amorosi, who is suing her mother? 

Not sure any of these folks celebrate Christmas together any more.

Happier times: Elisabeth, Rupert and James Murdoch in 2010. Credit: AFP

In the case of Rupert Murdoch, he moved to change the arrangements in the family’s irrevocable family trust. Why? To ensure that his No.1 son, Lachlan, the one most like dad in terms of the Rupert vibe, would remain in charge of all the television networks and newspapers. Now it’s on for young and old, with James, Elisabeth and Prudence uniting to stop the changes and Lachlan hanging out with his father.

James Fisher from the ANU’s College of Law explains the basics: “Family trusts allow you to separate the ownership of assets (and the responsibility for managing them) from the right to benefit from those assets and any income they generate.”

But here’s the problem, says Fisher: “The family members who might hope to benefit from the trust property are not legally its owners.”

Derwent Coshott, a Sydney university academic and a specialist in family trusts, says these arrangements are all about trying to save the legacy. He reminds me that at the very beginning of Downton Abbey, we see bickering over who is going to inherit what and when.

“In terms of succession planning, the idea is to ensure the way you want to do things will continue after you die,” he says.

He probably means Succession planning, but we get it.

“It’s called the ‘dead hand’. The idea is that it will be passed on to Lachlan and the Murdoch legacy will continue.”

Yep, that cold dead hand will continue long after Murdoch shuffles off and has a thousand very positive obituaries posted on his thousands of media outlets.

Is this just a weird anomaly among the very, very rich? Barnett says no: “These cases happen more often than you’d think.”

She tells the story of one of the most famous of trust cases, Re Gulbenkian, studied by all students across the common law. It began exactly from this kind of dispute. Sarkis Gulbenkian, a reclusive and miserly millionaire created a trust for his son Nubar Gulbenkian. Nubar was a well-known bon vivant who was as profligate as his father was miserly, but equally canny with business deals.

They had a falling out when Nubar (who was working for his father for free) asked his father to pay a few dollars to cover the chicken and tarragon jelly with asparagus tips he’d had for lunch. When his father refused to pay, Nubar sued him, and Sarkis retaliated by cutting Nubar out of the trust. Nubar sued him again for this (and received a settlement).

The outcomes are often financial settlements between family members (that’s what Nubar Gulbenkian did, and also what Hope Rinehart Welker has done with her mother), says Barnett. But these disputes often reflect other emotional tensions in the family, just as with wills, so resolutions are not always possible.

Barnett says here there is a clear preference for Lachlan Murdoch, and an estrangement of the other children.

“That may add fuel to the fire of a dispute,” she says.

Get the best of Sunday Life magazine delivered to your inbox every Sunday morning. Sign up here for our free newsletter.