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.

   

When Courts Look Beyond the Paper: Lessons for MAPTs, Irrevocable Trusts, and Late-in-Life Planning

• At a glance

  • Five weeks before Anne Fields died of Alzheimer’s disease, her agent moved about $17 million of her assets into a family limited partnership.
  • The estate reported her partnership interest at $10.9 million, a discount of roughly $6 million.
  • The Tax Court and the Fifth Circuit pulled the full $17 million back into her estate under IRC § 2036(a). The result was a $1.8 million tax deficiency, a $270,000 penalty, interest, and years of litigation.
  • The estate’s nontax reasons failed because the facts didn’t support them. Hiring professionals did not avoid the penalty.
  • The lesson reaches beyond partnerships: planning done in the shadow of death or long-term care gets the hardest look, including Medicaid asset protection trusts.

  Five Weeks

On May 20, 2016, Anne Fields was in the end stage of Alzheimer's disease. She had fallen repeatedly, broken her hip twice, and been in and out of the hospital. That day her great-nephew, acting under a power of attorney she had signed six years earlier, formed a limited partnership. Over the next three weeks he moved about $17 million of her assets into it. She went into hospice on June 15 and died on June 23.

On paper, she now owned a 99.9941% limited partnership interest instead of the assets themselves. Because a limited partner can't control the partnership or easily sell the interest, the estate valued her interest at $10,877,000. The paperwork had made roughly $6 million of value disappear for estate tax purposes.

The IRS disagreed. So did the Tax Court (T.C. Memo. 2024-90), and on June 8, 2026, so did the Fifth Circuit in Estate of Anne Milner Fields v. Commissioner. The full $17 million went back into her estate. The estate owed an additional $1,828,594 in tax, plus a 20% accuracy-related penalty of $270,417, plus interest, plus the cost of years of litigation. The strategy meant to save tax cost the beneficiaries far more than it could ever have saved.

The Timeline

When	What happened
2010	Fields signs a will and a power of attorney naming her great-nephew, Bryan Milner, as executor and agent
2011	She is diagnosed with Alzheimer’s disease
2011 and 2013	Two incidents of financial elder abuse occur
May 20, 2016	Milner forms AM Fields, LP; his own LLC is the general partner, with a $1,000 contribution
May 25 – June 13, 2016	About $17 million of her assets move into the partnership
June 15, 2016	She enters hospice
June 23, 2016	She dies
Estate tax return	Her partnership interest is reported at $10,877,000
2024	The Tax Court includes the full $17 million; deficiency of $1,828,594 and penalty of $270,417
June 8, 2026	The Fifth Circuit affirms

Why the Partnership Didn't Work

Section 2036(a)(1) pulls property back into a decedent's estate if she transferred it during life but kept the use or income from it until death. Fields kept exactly that. The partnership held her money, and her money paid for her life.

There is one exception: a "bona fide sale for an adequate and full consideration." For a family partnership, courts generally require a legitimate and significant nontax reason for forming it. As the Fifth Circuit put it, "A significant purpose must be an actual motivation, not a theoretical justification."

The estate offered several reasons. The courts tested each one against the facts.

The Estate’s Reasons, and What the Courts Found  The estate’s reason What the courts found The power of attorney had limits, and the successor agents were a concern No contemporaneous evidence that anyone was concerned. Fields was of sound mind when she chose the successors. The partnership made succession harder, because it required unanimous consent. Financial institutions wouldn’t honor the power of attorney The agent moved $17 million in about three weeks using that same power of attorney. The assets needed to be consolidated and streamlined The assets were a professionally managed brokerage account, bank stock, and a tree farm run by an outside company for decades. There was nothing to consolidate. The partnership would protect her from elder abuse The abuse occurred in 2011 and 2013. Nothing was done for years, until her health collapsed.

The courts also pointed to what the record did show: the timing; no real change in how the assets were managed; the agent acting for both sides of the transaction; transfers that left the estate without enough cash to pay her bequests; and an attorney's email seeking a "deeper discount." The court called the stated reasons after-the-fact justifications, not actual motivations.

Why the Penalty Stuck

The estate also lost on the 20% penalty. A taxpayer can avoid it by showing reasonable cause and good faith, often by relying on professional advice. That defense failed here for two reasons:

• First, there was no evidence that any professional had advised reporting the partnership interest at a discount, or that the treatment was proper. Hiring professionals is not the same as relying on their advice about the specific position. 

• Second, the court said a $6 million reduction in value should have struck someone with the agent's background in finance and banking as "very possibly too good to be true."

For agents and executors, that is the uncomfortable part of the case. Having advisors in the room does not, by itself, protect the person who signs.

Late-Life Planning Draws the Closest Look

Fields reinforces a point we have discussed before in connection with late-life will changes and the "magical mystery tour" of litigation. Planning done in the shadow of serious illness or imminent death is examined more critically. Courts and agencies look past the documents to the substance of the transaction: the timing, who really controls the property, how it actually operates, and whether the stated purpose is believable. A structure that might hold up if set up years earlier can unravel when it is set up in the final weeks of life.

Medicaid asset protection trusts and other irrevocable trusts face similar questions under different law. A Medicaid agency is not applying section 2036. It applies a five-year look-back, a transfer penalty, and a test of whether the trust's assets are still an available resource. But the questions rhyme. A comfort clause that lets the trustee pay for the settlor's needs, or a pattern of using the trust as if nothing had changed, will be read the same way these courts read the partnership. A carefully drafted document is necessary, but rarely enough. Planning done when nursing-home care is near gets the hardest look.

The Agent's Exposure and the Family's Cost

When a strategy produces a large deficiency, a penalty, and big professional fees, disappointed beneficiaries look for someone to hold responsible. An agent who engineers a late-life transaction that fails can face claims that the strategy was imprudent, that it raised rather than lowered the estate's costs, or that it exposed the estate to avoidable interest and penalties.

Even an agent who acted on advice can be drawn into disputes over who pays the fees, how the extra tax is shared, and whether the agent should bear part of the loss personally. Those disputes generate their own legal bills, and they can fracture a family. It is the same unpredictable, expensive "magical mystery tour" that follows a contested deathbed will.

What to Do Instead

• Plan while capacity is clear and health is stable. Time is the best evidence of a real purpose.

• Write down the nontax reasons when you act. A reason documented at the time carries weight. A reason assembled for trial usually doesn't.

• Make the change real. If an entity or trust is supposed to change who controls or benefits from property, it has to actually operate that way.

• Keep enough outside the structure. Leave the person enough to live on, and the estate enough cash to pay its bills and bequests.

• Be wary of numbers that look too good. If a valuation discount seems like a windfall, get a second opinion before relying on it.

• Agents: get written advice on the specific step. Ask whether the power of attorney authorizes it, and whether it fits the principal's plan and best interests. General engagement of professionals is not enough.

Bottom Line

Fields does not announce a new rule. It applies long-standing substance-over-form principles to facts that are, unfortunately, not uncommon. A partnership formed five weeks before death, with no change in how anything was managed, saved nothing. It added a penalty, interest, legal fees, and years of uncertainty for the family.

The most reliable protection is the one we return to throughout this blog: thoughtful planning done early, documented carefully, and carried out so that the substance matches the form.

Sources: Estate of Anne Milner Fields v. Commissioner (5th Cir. 2026); ElderLawAnswers summary.