You can learn lessons from estate planning mistakes made by others. There is no estate planning “beat” that the press covers on a day-to-day basis, so this subject is rarely addressed.
However, the death of a high-profile individual will be covered by journalists on occasion, and one of these situations came to light recently.
Tony Hsieh retired in August of 2019 after spending 20 years as the CEO of Zappos online shoe store. He acquired an interest in the company when it was in its infancy in 1999, and was able to provide funding because of a previous business venture.
Hsieh graduated from Harvard in 1995, and co-founded LinkExchange the following year. This was an early Internet advertising cooperative, and his entrepreneurial dream was realized when Microsoft paid $265 million for it two years after its founding.
Zappos reported gross sales of just over $1 million when Hsieh joined the company. By 2008, the figure was $1 billion. In 2009, Zappos was sold to Amazon for $1.2 billion, but Hsieh retained his CEO role until he retired.
Three months after he moved on, he died of complications from smoke inhalation and burns after exposed to a house fire in Connecticut. He was a longtime resident of Las Vegas, and was visiting family and friends at the time.
No Estate Planning Documents
He was never married and had no children. He was survived by his parents and two brothers. His older brother and father have petitioned the court to serve as the administrators of his estate. They stated Hsieh did not have a will or any other estate planning documents when he passed away. As far as they know, he did not express his wishes in any other manner.
Since he was a resident of Nevada, once final debts are paid and all procedural hurdles are crossed, the assets will be distributed according to Nevada intestacy laws. Under these laws, his parents will inherit since he did not have a spouse or children.
Estate Tax Considerations
The federal estate tax can take a heavy toll on your legacy if you are exposed, because it carries a 40 percent maximum rate. That’s the bad news, but the good news is that most people do not have to worry about it.
You can use an exclusion to transfer a certain amount tax-free. The reason why most people do not have to be concerned about the tax is because the exclusion is currently $11.7 million. Since Hsieh passed away in 2020, an $11.58 million exclusion will apply to the Hsieh estate. That’s a lot of money for most people, but Hsieh’s estate was valued at $840 million according to Forbes and other sources.
Estate planning attorneys help high net worth clients mitigate their estate tax exposure. We have no way of knowing exactly how Tony Hsieh positioned his assets, but his family has said he did not have an estate plan in place. In addition to the estate tax situation, his own true wishes will never be realized. It is possible he wanted his parents to inherit the entirety of his fortune. However, there was certainly enough to spread around among other people he cared about, and he may have chosen to support causes and/or institutions that were meaningful to him. Instead, his estate will pay estate taxes of around $330 million, and with proper planning a great deal of this tax liabi lity could have been avoided.
Don’t Take Unnecessary Risks!
Even if you have no estate tax concerns, there are good reasons why you should work with an attorney to put a plan in place.
We can gain understanding of your situation and provide recommendations so you can make fully informed decisions. When you decide to go forward, we can create a custom crafted plan ideal for you and your family.
You can set up an appointment in Oklahoma City if you call us at 405-843-6100. Our Overland Park, Kansas office can be reached at 913-385-9400. Or you can fill out our contact form if you would prefer to send us a message.