Murdoch family battle highlights Nevada’s secret trust boom

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The Murdoch family feud, playing out in an undisclosed Nevada courtroom, underscores the state's growing popularity as a global center for family trusts and home to some of the world's largest fortunes.

According to legal industry rankings, Nevada is now the best state in the country for so-called asset protection trusts like the one at the heart of the Murdoch dispute. The state’s unique combination of no income tax, ironclad confidentiality protections and strong defenses against creditors make it an ideal location for large family trusts set up to protect assets.

Nevada does not report the total amount of assets held in its trusts. The western state’s burgeoning industry of trust and estate attorneys, trust companies and mediators deliberately keeps a low profile. Yet experts estimate the state likely has hundreds of billions of dollars in trust assets locked away in nondescript office buildings or trust companies that offer little to no visibility to the outside world.

“Nevada has been No. 1 for at least four years,” said Steven Oshins, a Nevada attorney who publishes the most cited rankings of states based on their appeal to asset protection trusts.

South Dakota is a “close second” and “then there’s a big drop off for the next group with Tennessee, Delaware and others,” Oshins added.

Nevada’s advantage puts it at the forefront of a massive wealth boom flowing into asset protection trusts. The U.S. held more than $5.6 trillion in trust and estate assets in 2021 — more than double the 2011 level, according to data from economists Thomas Piketty, Emmanuel Saez and Gabriel Zucman. The estimate is just “the tip of a multi-trillion-dollar iceberg,” the group said, since many trusts are not reported to the IRS.

Much of the recent growth is being driven by the so-called Great Wealth Transfer, in which more than $80 trillion is expected to be passed on to generations, according to trust and estate lawyers. The potential expiration next year of the estate and gift tax exemption, which currently allows couples to give away up to $27 million tax-free, is also fueling the creation of new trusts. Fears of a global wealth tax, a tougher IRS crackdown on wealthy taxpayers and a wave of foreign millionaires and billionaires using the U.S. as the latest offshore tax haven are also fueling demand.

In the race among states to attract hundreds of billions of dollars in new trust assets, Nevada has a comfortable lead. The Legislature regularly updates its trust laws and regulations to make them more attractive.

Nevada has no state income tax, no corporate income tax, and no estate tax, which helps trusts grow in value without any deductions. Its confidentiality laws are also among the strictest in the country. In 2009, the Legislature passed a law that makes all documents filed with the Division of Financial Institutions “confidential.”

While all trust cases in Nevada are officially part of the public record, attorneys bringing a case can use a new 2023 law to keep the name of the trust, its founders and its beneficiaries confidential without a court order. In addition to confidentiality, it is one of seven states that allow “silent trusts,” which allow the trustee to keep the existence of the trust a secret from the beneficiaries under the trust terms.

Nevada is also unusual in having “no exception creditors” — meaning that even ex-spouses, alimony claimants, or plaintiffs in lawsuits have no access to a trust. Perhaps the most powerful benefit, and the one that directly affects the Murdoch case, is the trust’s flexibility.

At the heart of the Murdoch case is the Murdoch Family Trust, which holds the powerful voting shares. News Corp. And Fox Corp. who effectively control the companies. (The trust also includes the family farm in Australia, Murdoch's art collection and the Disney shares.)

Under the current terms of the arrangement, when Rupert Murdoch dies, control of the trust would pass to four of his children: Lachlan, James, Elisabeth and Prudence. Each would have one vote, meaning that no sibling could gain control without the others. The trust was created as an irrevocable trust, meaning that it is designed to be permanent.

However, according to The New York Times and The Wall Street Journal, Rupert Murdoch has decided to rewrite the trust to give Lachlan control after Rupert's death. He claims it is in the best financial interests of the other children, a claim at least some of whom have contested. Spokespeople for News Corp. and Fox declined to comment.

Changing an irrevocable trust is nearly impossible in many states. But in Nevada, it is common, thanks to a special exception known as “decanting.” The state allows irrevocable trusts to be decanted, or changed into a new trust, as long as certain conditions are met. In the case of the Murdoch dispute, Rupert will have to prove to a probate court that he acted “in good faith and solely for the benefit of the heirs.”

“In Nevada, you can usually resolve things like this pretty easily,” says Elyse Tyrell, a probate attorney at Tyrell Law PLLC in Henderson, Nevada.

Nevada trust and estate lawyers said it is somewhat unusual for a trust donor — in this case Rupert Murdoch — to claim he is acting in the interests of heirs who oppose him. But if he can argue that Lachlan’s control would maximize the financial value of News Corp. and Fox Corp., and thus benefit all the siblings, the court may side with him. The trial is set to begin in September.

It is also unusual for a family to create a trust in Nevada without having business or personal ties to the state. Living in Nevada is not a requirement for setting up a trust. None of the Murdochs appear to own homes in Nevada, and none of their companies have public headquarters there.

“Normally a family would have some ties in Nevada to establish trust, either by living here or owning property,” Tyrell said. “I don't believe any of the Murdochs have ever lived here.”