Rod Maclean

Media business magnate Rupert Murdoch’s family’s public drama regarding ownership is perhaps the biggest family business law story of a generation. Beneath the glitz lies a classic archetype of succession squabbles. Families – whether they’re running a multinational empire or a local farm – can become discordant.

We saw a similar situation play out in HBO’s acclaimed drama Succession and that has just fuelled the public’s fascination in this case. 

Relationships, whether family relationships or business relationships, inevitably change over time and that’s why succession planning is so crucial, and the details so important.

Rupert Murdoch, grandson of a Scottish-born presbyterian minister, set up a trust in the US state of Nevada 25 years ago (about a year before the birth of his fifth child, Grace). The trust was designed to share power of his empire amongst his then four children: Prudence, Elisabeth, Lachlan, and James.

However, according to reports, Murdoch later decided he wanted to give all power to his eldest son, Lachlan. While not impacting their financial inheritance, this would have removed James, Prudence and Elisabeth’s voting power.

As we’ve seen in the last week though, he lost this legal battle. At least for now. 

It is worth stating that it appears that the trust didn’t fail, and, actually, worked as it was created to. The issue arose when Rupert Murdoch wanted to rewrite the script 25 years on. In the end the trust couldn’t be changed, even although it seems Rupert’s relationship with his family did. The best legal team in the world can’t help you if the main problem is regret.

Although the case was dealt with under Nevadan law, it is striking how relevant the issues involved are whatever the jurisdiction. The case provides some important food for thought when considering business succession or setting up a trust. People change their minds, and family dynamics shift. For many, building in flexibility to succession plans can be beneficial and may avoid complications down the line. For example, you can utilise legal tools such as discretionary trusts with a designated trust protector – a feature that has been growing in popularity over recent years in Scotland.

Here in the UK, this story has hit headlines just after the recent budget included significant proposals for changes to inheritance tax. The proposals, which will come into force over the next 2-3 years, see pensions brought into the inheritance tax net, reliefs for agricultural and business property capped, and big changes to the treatment of AIM shares and domicile rules. These reforms will push many families, especially those with farms or businesses, to rethink their plans entirely.

In particular, the proposed cap on business and agricultural property relief, will require serious consideration by business owners and farmers. Families who’ve relied on these mechanisms to hand down their legacy will face tough decisions. With reliefs over £1 million soon to be halved to 50 per cent, lifetime planning starts to make a lot more sense rather than waiting until death. And pensions? They have long been viewed as extremely tax-efficient vehicles, but from 2027 they will no longer be exempt from inheritance tax.

For Scottish families and business owners, there is a clear message: don’t leave your succession planning until it is too late.

The succession issues facing Rupert Murdoch are not just the preserve of multi-billionaires but are common to businesses of all sizes. If you’ve been putting it off, now is the time to act – before these new rules force your hand.

Rod Maclean is a partner at Wright, Johnston & Mackenzie LLP