Zappos CEO, Tony Hsieh, tragically passed away on November 27 at the young age of 46. According to his family, he did not have an estate plan. This means that Mr. Hsieh’s life work and sizeable fortune (Forbes estimates his net worth was approximately $840 million when he died) will be distributed according to state law instead of his wishes.
Mr. Hsieh was a Nevada resident when he died. This means that his estate will pass according to Nevada law. But what would have happened if he was a resident of Georgia?
How would his estate be taxed?
While Georgia does not have a state estate tax, a person living in Georgia may still be subject to the federal estate tax.
Your estate is the sum of your assets. The federal estate tax exemption is currently $11.58 million. The federal estate tax rate is up to 40% of anything exceeding $11.58 million. This means that if you pass away with less than $11.58 million in your taxable estate, there is no federal estate tax due.
Mr. Hsieh passed away with an estimated net worth of about $840 million. This will be a substantial tax bill!
An experienced estate planning attorney could have helped him mitigate this tax. Strategies include utilizing annual gifts of $15,000, Trusts, and charitable giving.
Who would inherit the estate?
When someone passes away without an estate plan, their estate is distributed according to state law rather than that person’s wishes.
Each state has its own statute that dictates who inherits when a person passes away without an estate plan (for example a Will or Trust). However, each state tries to guess or emulate what the typical person would have wanted. This is referred to as intestate law. Unfortunately, state law doesn’t always get it right.
If Mr. Hsieh was a resident of Georgia, his parents would inherit his $840 million estate. Without an estate plan stating otherwise, we cannot know for sure if he would have wanted this.
The outcome would have been different if Mr. Hsieh left behind a spouse or children. Under Georgia law, if you left a surviving spouse and children, your spouse and children will share equally in the estate. However, the surviving spouse’s share cannot be less than one-third of the estate. (Our clients are often surprised to learn the spouse is not entitled to the entire estate if there are children.)
This means that if Mr. Hsieh was married and had two children, his spouse would have inherited one-third of the estate and his two children would have each inherited one-third.
A properly drafted estate plan ensures that your assets pass to the people you choose instead of state law deciding for you.
What would the process be like for his family?
Unfortunately, along with the unimaginable grief his family is going through, they must now go through the process of settling his estate.
As with Mr. Hsieh’s estate, someone (usually a family member) is appointed as the administrator. The administrator oversees the court-supervised probate process. Probate involves gathering, accounting, and distributing the assets according to state law.
A Revocable Living Trust significantly simplifies the process for your loved ones by keeping your estate out of court. This, in turn, saves time, hassles, and expenses.
Estate planning is not just for the wealthy
Our thoughts are with the Hsieh family during this difficult time. Mr. Hsieh’s untimely death is a heartbreaking reminder that we likely won’t know when the end of our life is near. This is why it is imperative to put a plan in place – no matter the size of your estate.
Our experienced estate planning attorneys can make it easy for you to check this off your to-do list. We can create a plan that keeps you in control of who inherits your assets, simplifies the process for your loved ones, and prevents legal proceedings and taxes from taking a huge chunk of what you own when you pass.