Sometimes you can learn lessons from the estate planning mistakes that have been made by other people. As estate planning attorneys, we speak to a lot of surviving family members that tell us stories, but laypeople do not have the same sources of insight.
However, when a high profile person passes away, the press will often share the details. A situation like this was in the news a couple of years ago when former Zappos CEO Tony Hsieh passed away due to complications from burns and smoke inhalation.
Early Business Success
He was just 46 years old at the time of his death, but he certainly made his mark in the business world. Hsieh co-founded an internet advertising network called LinkExchange in 1996, and he sold it to Microsoft two years later for $265 million.
The Harvard educated entrepreneur used the funds to start Venture Frogs, a firm that provided startup capital, and they invested in the startup that became Zappos. Hsieh came onboard as the CEO shortly after he agreed to back the company in 1999, and the rest is history.
Zappos was sold to Amazon for over $1 billion in 2009, and Hsieh retained his post as CEO until he retired just a few months before he passed away in November of 2020.
No Estate Planning Documents
Tony Hsieh passed away with no estate planning documents at all, and he made no effort to prepare for this eventuality. When someone passes away without a will or trust, intestate succession laws are used to determine who should inherit the estate.
Hsieh grew up in the San Francisco Bay Area, but he moved the company to Las Vegas early on, and he was a Las Vegas resident. In fact, he poured a great deal of money into the revitalization of the downtown area.
He was never married, and he did not have any children. As a result, under the intestate succession laws of the state of Nevada, his parents are the sole inheritors of the estate.
Intestacy is never a good thing, because the estate administration situation is unnecessarily complicated. Plus, the eventual asset distributions may not be consistent with the wishes of the decedent.
These factors certainly apply to the Hsieh estate, but there is another one that is extremely important. There is a federal estate tax in place that is applicable on transfers that exceed a certain amount. This dividing line is called the estate tax credit or exclusion.
During the 2020 calendar year, the exclusion was $11.58 million. The rate of the death tax was, and still is, a very hefty 40 percent.
At the time of his death, Tony Hsieh’s net worth was $840 million according to sources. This means that well over $800 million was potentially subject to the federal estate tax and its rather draconian 40 percent rate.
There are a number of states in the union that have state-level estate taxes, and the exclusions in these states are lower than the federal exclusion. Fortunately for his family, there is no state estate tax in Nevada.
However, if he owned valuable property in a state with an estate tax, it would be applicable. He reportedly assembled a portfolio of property in Park City, Utah, but there is no estate tax in Utah. He was visiting a friend in Connecticut when the fire took his life, and there is an estate tax in Connecticut, New York, and some other states in our region.
Don’t Take Chances
Few of us have had the level of financial success that Tony Hsieh had, but the lesson is the same for everyone. You never know what the future holds, so you should certainly put an estate plan in place as soon as you become a self-supporting adult.
If you are currently unprepared, now is the time to take action. We can gain an understanding of your situation and help you devise a custom crafted plan that is ideal for you and your family.
You can schedule a consultation appointment at our Manhattan, NY estate planning office if you call us at 212-973-0100, and you can fill out our contact form if you would prefer to send us a message.
While he was in law school, he worked as an aide to the late John Sparkman, Senior Senator from Alabama. This gave him the opportunity to gain intimate knowledge of the workings of government, and this background has served him well.
He started his private practice in New York in 1974, the first Sikh to be admitted to the bar in the state of New York.And in 1995, when he narrowed his legal focus to the areas of estate planning and elder law, the prestigious American Academy of Estate Planning Attorneys accepted him into their membership.
Special needs planning is an important aspect of the field, and Mr. Khalsa has intertwined his empathy with his expertise to become a leading advocate in this area. Shortly after the Education for All Handicapped Children Act was enacted in 1975, he won the first case in New York that was adjudicated under this law.
S.J. Khalsa has a penchant for philanthropy, and he has raised well over $20 million for charities nationwide. He is a deeply spiritual man who represents the Sikh religion at religious and interfaith gatherings all over the globe.
He believes that successful professionals should contribute to the fabric of their communities, and to this end, he works with law enforcement in New York.
Mr. Khalsa is a graduate of the FBI Citizens Academy program, and he is active in their Alumni Association. He is a member of the FBI/New York Police Department Joint Task Forces on Civil Rights and Hate Crimes, and he sits on the Community Engagement Council that advises the FBI Assistant Director for New York.
He is the author of the highly acclaimed book, Estate Planning Essentials: A Guidebook for Modern Families. Lawyers of Distinction recognized him for his excellence in 2020, naming him a 2020 Power Lawyer, and he is a member of the prestigious American Academy of Estate Planning Attorneys.
Mr. Khalsa lives in Manhattan with his wife, and he has two grown children and four grandchildren. He likes to travel, and he is an avid golfer. As the co-owner of Kundalini Yoga East in New York along with his wife, he instructs practitioners and aspiring yoga teachers.
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