Tony Hsieh was an interesting man who enjoyed great success at an early age. He was entrepreneurial during his days at Harvard when he started a pizza delivery service, and he cofounded LinkExchange when he was 22.
This Internet advertising company exploded, and after two years of growing popularity, the partners sold LinkExchange to Microsoft for $365 million.
At that point, he founded Venture Frogs, a firm that provided capital for start-ups. He got a call one day from a stranger named Nick Swinmurn, who left a voicemail.
Swinmurn wanted to start an online shoe store, and Hsieh was going to hang up the phone until the caller emphasized the fact that it was a $40 billion a year industry. Tony Hsieh took the bait, and he joined the newly-minted Zappos as the CEO two months after agreeing to the deal.
The company’s revenue grew from $1.6 million in sales in 2000 up to $1 billion in 2009, and at that point, Amazon was ready to make a move. They acquired Zappos for $1.2 billion, and Hsieh stayed on board as the CEO.
He retired from Zappos in August of 2020, and his net worth was about $840 million according to Forbes. In November, he was a guest at a friend’s house in Connecticut when it caught fire, and he suffered from burns and smoke inhalation.
No Estate Planning Documents
Hsieh died on November 27th, and he is survived by his parents and his two brothers. His father and his older brother have asked the court to designate them as the administrators of the estate.
They informed the court that that Tony did not execute any estate planning documents before his passing.
In intestacy cases, the probate court supervises the administration process as the assets are inventoried and final debts are paid. Ultimately, the intestate estate is distributed under the intestacy succession laws of the decedent’s state of residence.
Hsieh grew up in the San Francisco Bay Area, and this was the location of the original Zappos office during the company’s infancy. When they realized that the company would be viable over the long haul and expansion was going to be necessary, they relocated to Las Vegas.
Tony Hsieh was a longtime Las Vegas resident at the time of his death, and he put a lot of money into downtown revitalization projects. He was not married, and he did not have any children, so his parents are in line to inherit his estate under the Nevada intestate succession laws.
Estate Tax Implications
The federal estate tax carries a 40 percent rate, and there is an exclusion that can be used to transfer a certain amount tax-free. Most people would say the exclusion is quite high at $11.58 million in 2020. Of course, as they say, everything is relative.
When your estate is valued at $840 million, $11.58 million does not go very far. There are estate tax efficiency strategies that can be implemented by high net worth individuals, and we do not know how Tony Hsieh positioned his resources.
However, since he did not have an estate plan, it is logical to assume that the positioning was less than ideal from a tax efficiency perspective.
There are state-level estate taxes in some states, and the exclusions in these states are lower than the federal exclusion. There is no estate tax in Nevada, but if he owned property in a state with an estate tax, it would be applicable if its value exceeds the exclusion in that state.
Don’t Take Chances
The Kobe Bryant tragedy underscored the reason why you should have an estate plan in place when you are still young, and this is another example. Obviously, most people are not in possession of this kind of wealth, but that’s not the point.
Everyone should assert their wishes and make sure that they take the right steps to provide for their loved ones in the optimal manner. If you are currently unprepared, now is the time for action.
You can schedule a consultation appointment if you give us a call at 310-337-7696, and you can fill out our contact form if you would like to send us a message.
Cesar has received his Masters of Science in Integrated Design, Business and Technology from the University of Southern California.
- Protecting Your Digital Assets: What Happens to Your Online Accounts After You Pass Away? - March 23, 2023
- Peace of Mind in Contentious Probates: Why a Professional Fiduciary is Essential - March 20, 2023
- Expertise, Objectivity, and Efficiency: Why Single Individuals Need a Professional Fiduciary in their Estate Plan - March 18, 2023
