Zappos CEO’s lack of estate planning could lead to years in probate court

Zappos CEO's lack of estate planning could lead to years in probate court

Just weeks ago, Tony Hsieh was a vibrant, fun-loving man worth around $700 million, with friends and family relying on him for income, a roof over their heads and a steady stream of parties and good times.

But the family and friends of the former Zappos CEO, who died Nov. 27 at age 46 just a few months after he left Zappos -- a company he sold to Amazon for over $1 billion, will, unfortunately, likely spend the next few years in probate court. That is because Hsieh died with no estate plan.

It may seem surprising that someone so affluent, successful and meticulous about so many aspects of their life and work would die without ever having creating an estate plan, but according to a 2020 survey by senior services resource Caring.com, only three in every 10 Americans have prepared documents for their own death. And the prevalence of estate planning has actually decreased significantly, by about 25% in the last three years.

One would think this statistic excludes the ultra-wealthy, who have plenty of legal advisors and monetary resources to avoid this mess after they die. But we've seen celebrity after celebrity pass away without an estate plan, such as: Prince, Aretha Franklin and Amy Winehouse. All of their families suffered through public, expensive, and lengthy probate processes -- not to mention uncertainty and infighting -- because of it.

Without a will or trust, state law determines the order of who gets your assets, which is typically a spouse, children, parents, siblings and then distant relatives (who you may not even know). How those assets are divvied up between them is up to the laws of the state in which you resided at your death. It is administered by whoever the court decides to appoint as administrator of the estate -- a position that friends and family may come to resent.

Unfortunately, the family of Hsieh, specifically his father Richard Hsieh and brother Andrew Hsieh, who were recently appointed administrators of the estate, will likely have to endure this process. Anyone who believes they deserve a piece of the pie will try and take a slice, making a bad situation even worse. And, in the current COVID environment, it's likely to take years before his substantial estate will be distributed to his heirs, even though laws are clear about who will be getting what.

Other than Hsieh's family and friends, the biggest losers here are charities, who normally would receive significant gifts from an estate as substantial as Hsieh's. But charitable giving requires an estate plan that allocates specific assets to specific charities. Hsieh's lack of any estate plan means charities suffering from a lack of donations and heavy demand due to COVID lose out entirely, as do the people who rely upon them.

Many successful people make similar mistakes, all of which are entirely avoidable. It is much easier, cheaper, and painless to hire an attorney who can work with you on creating an estate plan than force your family and friends to go through the painful process of probate. That is not the legacy you want to leave.

Although it sounds a bit macabre, creating your "death book," as some call it, with detailed instructions of who gets what in your will and trust, as well as health care directives, passwords, homeownership information, titles to any property, retirement accounts, life insurance information, and instructions for what kind of funeral arrangements you want, is a reality we all need to face -- especially when people and communities are reliant upon us. No one knows what you want to happen to you and your assets better than you do, and creating a plan will eliminate the guesswork and emotional hardship on your family once you've passed.

Whenever a person of high wealth or status dies without a will, it should serve as a wakeup call for the rest of us that estate planning is a crucial (and often overlooked) step in life and financial planning, and it's up to you to plan ahead so that your family and friends are not left scrambling after you're gone.

As for the family of Tony Hsieh, they are left to not only pick up the pieces after losing an incredible person and processing that grief, but they now are forced to probate a complex estate through a court process that is far less efficient or cost effective than how the administration could have and should have happened. All the while leaving family members with another reason to ask: "Why?" 