When people pass away when they are relatively young, it serves as a reminder about the fragility of life. You never know what the future holds, and a completely unexpected event can change everything in the blink of an eye.
One-Time Zappos CEO Tony Hsieh
Tony Hsieh was a visionary entrepreneur that passed away on November 27, 2020 in Connecticut from complications of smoke inhalation and burns. He was a resident of Las Vegas, but he was visiting a friend at the time.
His rise to entrepreneurial success was meteoric. After he graduated from Harvard, he co-founded LinkExchange, which was an early internet advertising network. Two years after its founding in 1996, it was sold to Microsoft for a cool $265 million.
Hsieh was 24 at that point, and he went on to found a startup funding firm called Venture Frogs with an associate named Alfred Lin. In 1999, Hsieh listened to a voicemail pitch about an online shoe store, and he was ready to move on while the caller was still talking.
After all, you have to try on shoes because the fit can be tricky, and it was a decidedly unsexy business for a young entrepreneur. Just before he terminated the call, the man on the line, Nick Sminmurn, stated that footwear was a $40 billion annual market.
He went on to mention the fact that mail orders accounted for a significant five percent of that business. There was very little competition in the footwear space on the internet at the time, so Venture Frogs decided to take the plunge with Swinmurn.
Hsieh joined the company as the CEO, and it was named Zappos, which is a play on the Spanish word for shoes. During their first full year, their total sales figure was $1.6 million, and revenue took off from there.
Swinmurn moved on in 2006, and in 2008, they posted a sales figure that was in the $1 billion range. The following year, Amazon acquired Zappos for $1.2 billion, and Hsieh kept his post as the CEO.
In August of 2020, he retired from Zappos, and he passed away about three months later.
No Estate Planning Documents
Tony Hsieh was never married, and he had no children. His family stated that he did not have a will or any other estate planning documents in place when he died. Since he was a resident of Nevada when he passed, the assets were distributed under the intestate succession laws of that state.
Under their statutes, his parents were the sole inheritors of the intestate estate after final debts were paid and the estate was closed by the court. His net worth was estimated at $840 million.
Estate Tax Implications
The estate tax is not a factor for most people, because there is a credit or exclusion that can be used to transfer a certain amount tax-free. In 2020, the exclusion was $11.58 million, and it is $12.92 million this year.
Since the exclusion is so high, very few families have to worry about this tax, but everything is relative. The first $11.58 million of Hsieh’s estate would have been transferred tax-free, and the rest of the $840 million could have been subject to the estate tax and its robust 40 percent rate.
There are steps that can be taken by high net worth individuals to mitigate their estate tax exposure. This will typically involve the utilization of trusts, but since he did not have any estate planning documents, one would assume that he took no steps to gain estate tax efficiency.
Don’t Take Risks!
This situation serves as a wake-up call when it comes to the risks that you take when you go through life without an estate plan. Obviously, very few of us have this kind of money, but estate planning is important for all responsible adults.
There are different approaches that can be taken, and the right way to proceed will depend on the circumstances. When you work with an attorney from our firm, we can gain an understanding of your situation and help you devise a custom crafted plan that ideally suits your needs.
You can schedule a consultation at our Burbank, CA estate planning office if you give us a call at 818-937-2335, and there is a contact form on this site you can use to send us a message.