Warner Doesn’t Trust Paramount

If you’re a normal person, most of your wealth is probably in your own name. But if you’re one of the richest people in the world, you probably have a lot more complicated estate and tax planning, which probably means that a lot of your wealth is in trusts, legal arrangements that your lawyers set up to hold assets for you. Most simply, you might have a revocable trust, where your assets technically belong to the trust but you have control over the trust’s assets, investment decisions, beneficiaries, etc. This can be useful for estate planning, but for most purposes owning assets in a revocable trust is pretty much like owning them yourself. I regularly say that Mark Zuckerberg owns a lot of shares of Meta Platforms Inc., or that Elon Musk owns a lot of shares of Tesla Inc., even though neither statement is exactly true. Their trusts own the shares.1 But for most practical purposes you could think of,2 they own them.

This creates, I suppose, a small dumb problem. Let’s say you build big yachts and Mark Zuckerberg comes to you and asks to buy a billion-dollar yacht. Naturally he will pay you the billion dollars on completion of the yacht. You might ask him: “Well, do you have a billion dollars?” And he might say “no, actually I don’t. But The Mark Zuckerberg Trust owns like a bajillion dollars’ worth of Meta stock, and I control that, so I’m good.” You find that persuasive, so you pull up the yacht sale contract and — who do you put in as the buyer?3 If you put “Mark Zuckerberg,” he has no money. If you put “The Mark Zuckerberg Trust,” it has plenty of money, now. But if it is a revocable trust, he can just take all the money (shares) out whenever he wants. It’s revocable! If he changes his mind about the yacht, he can clean out the trust. You’ll send the bill to the trust, but the trust will have no money, and you’ll be stuck with the yacht.