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Delivering Happiness: One Will at a Time
When people pass away, it serves as a reminder of life's fragility. You never know what the future holds and it only takes one event to change everything in a blink of an eye.
Tony Hsieh was a visionary who co-founded Zappos, a shoe company, which focused heavily on customer service and famously offered customers free shipping and a complete refund on all shoes within a full year after purchase, no questions asked. At only 46 years old, Tony Hsieh passed away from smoke inhalation complications from a fire at his vacation home in Connecticut. At the time of his death, Tony was worth an estimated $840 million, but despite his immense wealth he did not even have a simple will prepared. Given Hsieh's altruistic nature, it is puzzling why basic estate planning documents had not been prepared. Unfortunately, he is not the first among celebrities and high-profile individuals to become victims due to lack of estate planning.
A quick lesson in estate planning; if you die without a will, it means you have died "intestate". When this happens, the intestacy laws of the state where you reside will determine how your property is distributed upon your death. Since at time of death Tony was a resident of Nevada and without a spouse, children, or a will, under Nevada's intestate succession laws, all $840 million of his assets will go to his mother and father. Before this can occur all of Tony's debts and creditors must be paid and then the federal estate tax liability needs to be paid before the residue can pass to his parents.
Estate tax is not a factor for most people, as the tax code provides a hefty exclusion that can be used to transfer a certain amount of wealth tax-free to your heirs upon your death. Given Hsieh's massive fortune, his family will be hit with a tax bill that could potentially run in the hundreds of millions. Based on the current federal estate tax exclusion, the first $11.70 million of his estate will pass tax-free to his parents, but the remainder of his $840 million estate, will be taxed at a staggering 40% rate. To avoid the lengthy probate process and preserve estate privacy, Tony could have simply used a living trust that would have ensured all his assets would pass immediately to the beneficiaries of his choosing upon his death. At the same time, trusts and other strategies could have been developed to mitigate some of his potential estate tax liability; as well as ensure that a portion of his wealth went to the charitable and philanthropic causes that were near and dear to his heart.
To honor Tony's legacy and deliver happiness to those whom you love the most, please take the time to review your estate planning documents and make sure they have been properly updated for big events like births, marriage, divorce, etc. We would be happy to review your estate planning documents to make sure the appropriate plan is in place to meet your needs and desires.