What the Murdoch Trust Fight Teaches Drafters of Trust Amendment Clauses

Most trust litigation stays quiet. The filings get sealed, the settlement gets signed, and the rest of us never see how a judge actually weighs a trustee's motives against a trust's own terms. A newly unsealed Nevada probate file breaks that pattern, and it is worth a close read by anyone who drafts or administers an irrevocable trust with an amendment power built in.

The Background

The Murdoch Family Trust, an irrevocable trust, controls the family's voting stakes in Fox Corp. and News Corp. In late 2024, Rupert Murdoch pursued a restructuring effort internally called "Project Family Harmony." The plan would have let him appoint additional trustees with authority over the trust and its controlling shares in the two companies.

A Washoe County, Nevada probate commissioner, Edmund Gorman, reviewed the plan and recommended that the court deny it. His 96-page recommendation was filed in December 2024, but it stayed sealed until January 2026, when the Nevada Supreme Court forced its release. That is the file that, at least, new outlets can now read.

What the Commissioner Found

According to the unsealed recommendation, Gorman concluded the restructuring was built to cement son Lachlan Murdoch's control of the two companies after Rupert's death. He also found it was meant to preserve Rupert's editorial legacy and reduce the influence of his son James Murdoch, seen as the more liberal of the brothers.

That finding mattered because the trust's own language required any amendment to serve the beneficiaries as a group, not to advance one branch of the family over the others. Gorman found the trustee, Cruden Financial Services LLC, and the three managing directors who approved the plan acted in bad faith, abused their discretion, and breached the fiduciary duties they owed to all the trust's beneficiaries. He found the amendment's sole purpose was not the beneficiaries' benefit, as the trust document required. As This Is Reno reported, Gorman wrote that the plan amounted to an effort "to stack the deck in Lachlan's … favor."

Why the Internal Name Became a Problem

"Project Family Harmony" is the kind of label a client or a trustee's advisor picks without thinking much about how it will read years later in a public court file. Once the commissioner concluded the plan actually favored one beneficiary at the expense of others, the internal name became evidence of the gap between the stated purpose and the real one. The Associated Press, in a report carried by PBS NewsHour, noted that Gorman's own opinion used the phrase "carefully crafted charade" to describe the plan.

That is a lesson worth repeating: trust names, internal project names, talking points, and strategy memos do not disappear. If a plan cannot survive being read aloud by a skeptical judge, its name will not help.

Three Drafting and Administration Lessons

The case, and the unsealed determination, offer three lessons: 

• "Sole Benefit of the Beneficiaries" is not Decorative Language: Many irrevocable trusts include a clause requiring that any amendment serve the beneficiaries' collective interest. This case shows a court applying that standard the way it is written, not as a mere formality. If a proposed change is designed to benefit one beneficiary's position over the others, the standard clause is enough to defeat it, even without proof of self-dealing by the person exercising the power.

• Broad Appointment Powers Deserve Real Limits: The amendment here would have let Rupert Murdoch appoint additional trustees with authority over the trust and its controlling votes. A power that broad, held by one person or one branch of a family, is exactly the kind of provision that invites a bad-faith challenge later. When you draft an appointment or modification power into an irrevocable trust, build in a check: an independent trust protector, a defined and neutral process for adding trustees, or a requirement that any amendment be tested against the sole-benefit standard before it takes effect.

• Process is Evidence: The commissioner did not just look at what the amendment said. He looked at who devised it, why, and what the trustee and its directors did when they approved it. That means the process a trustee follows before approving a significant change- board minutes, outside counsel involvement, documented consideration of all beneficiaries' interests- is not paperwork for its own sake. It is what a court will examine first if the amendment is ever challenged.

A Caution on the Posture of this Case

Gorman's findings are a probate commissioner's recommendation to the district court, not a final appellate ruling on the merits. The file only became public because a state supreme court forced disclosure of a sealed record, which is itself a reminder: sealing a trust fight does not make it permanent. If your client's family later disputes the seal, or if a beneficiary successfully argues for access as this one did, the internal reasoning behind an amendment can surface years later, read by people the trustee never anticipated as an audience.

For drafters, the practical takeaway is simple. Write the amendment power narrowly, tie it explicitly to the sole-benefit standard, and assume that someday, someone besides the family will read the file.

New York Times Co. v. Second Judicial District Court, No. 89347 (Nev. Dec. 23, 2025):
https://caselaw.findlaw.com/court/nv-supreme-court/118075965.html
Thanks to Wealth Strategies Journal for reporting the case. 

When Courts Look Beyond the Paper: A Note Becomes a Gift

In our recent discussion of Estate of Fields, we examined how the Fifth Circuit Court of Appeals disregarded the formal structure of a late-life family limited partnership and pulled the underlying assets back into the decedent’s gross estate. The court looked past the documents to the timing, the retained benefits, and the absence of a genuine nontax purpose. 

A similar lesson emerges from the Tax Court’s decision in Estate of Spenlinhauer v. Commissioner (T.C. Memo. 2025-134, filed December 30, 2025). Together, the two cases reinforce a consistent theme: when intra-family transfers are made late in life, and the transferor continues to enjoy the property, courts will examine substance over form, and the formal paperwork often fails.

The Spenlinhauer Facts- A Very Generous Grandmother

At age 89, Georgia Spenlinhauer transferred her Massachusetts home to her son in exchange for a 30-year promissory note. She continued to live in the house until her death at age 95. No payments were ever made on the note. Near the end of her life the note was amended to raise the interest rate, restart a new 30-year amortization schedule, and add a self-canceling feature that would forgive any remaining balance at her death.

The estate treated the transaction as a sale and excluded the house from the gross estate. The Tax Court disagreed. It held that the full value of the residence was includible under IRC § 2036(a)(1) because Georgia had retained the right to possess and enjoy the property until her death. The note did not qualify as a bona fide sale for adequate and full consideration.

Why the Formal Structure Collapsed

The court applied heightened scrutiny to the intra-family arrangement and found multiple independent failures:

• No payments were made or documented, undermining any claim that a genuine debt existed;
• The self-canceling feature between family members carried a presumption of gift rather than debt;
• The repayment terms were commercially unrealistic, essentially requiring the mother to live well beyond any reasonable life expectancy; and
• Georgia’s uninterrupted occupancy supported an implied agreement that she would continue to enjoy the property.

In short, the transaction lacked economic substance. The note was treated as illusory, and the house remained in the estate.

The Parallel with Fields

Both Fields and Spenlinhauer illustrate the same judicial approach. In Fields, a rapidly formed limited partnership funded in the final weeks of life failed the bona fide-sale test. In Spenlinhauer, a promissory-note sale of a residence coupled with continued occupancy met the same fate. In each case, the court refused to respect the formal labels, partnership interest or installment note, when the practical reality showed retained enjoyment and an absence of arm’s-length dealing.These decisions also echo a broader caution we have raised about late-life planning generally. Transactions undertaken when health is declining, or death is foreseeable, invite closer examination. What might have been sustainable if implemented years earlier with consistent payments, realistic terms, and clear changes in control becomes vulnerable when executed late and administered loosely.Implications for Families and Advisors

Intra-family residential transfers structured as sales for a note, especially self-canceling notes, remain high-risk techniques when the parent continues to live in the home. The IRS and the courts routinely test whether the arrangement is a true sale or merely a disguised gift with retained use. Failure means estate inclusion, potential gift-tax issues, and the costs of controversy, precisely the sort of expensive, family-straining outcome that careful planning seeks to avoid.

More reliable alternatives exist for clients who wish to transfer a residence while retaining the right to live there for a period of years. A properly structured Qualified Personal Residence Trust (QPRT), for example, is a statutory mechanism designed for this purpose. It carries its own technical requirements and risks, but it does not depend on the fiction of a commercial note that no one intends to pay.

The deeper lesson remains consistent with the planning principles we regularly emphasize: substance matters. Courts look beyond the paper. Transfers that leave the transferor in essentially the same practical position as before, continuing to live in the house, receiving no payments, amending terms late in life, will struggle to withstand scrutiny.

For families, the safest course is still early, well-documented planning that produces real changes in ownership and control, accompanied by contemporaneous evidence of legitimate purpose. When those elements are missing, even carefully drafted notes and partnership agreements can be set aside, leaving the estate and the beneficiaries with unexpected tax bills and unanticipated legal expenses, as well as the residue of conflict. Spenlinhauer is a useful companion to Fields in making that point clear.

Thanks to Wealth Strategies Journal for the report and article idea.