Signing your documents is by no means the final step in your estate planning journey. Once you sign your documents, you should advise your personal representative and/or trustee where they are located and how to access them. Do not neglect this step! If your documents cannot be found when needed, it will be as if your plan never existed. The wishes you so carefully put into your plan will not matter, and state law will decide who gets what portion of your assets.
Also, you should compile an inventory of your financial resources, creditors, insurance policies, etc. Let your loved ones know where to find the inventory. After all, you created your plan to ease their burden when you are no longer around. Why would you make them stress and scramble to find your plan or search for your financial information?
The importance of these steps is well illustrated by looking at the estate of the late Tony Hsieh. We first wrote about him in 2020 (original post here). Hsieh is by no means the only high-profile person to die without a plan, but he is certainly among the richest – and his story among the strangest. Examining his mistakes can show us how to avoid our own mistakes.
The Zappos Fortune
Hsieh was the founder of online retailer Zappos. He sold the company to Amazon for $1.2 billion in 2009. A poker enthusiast, he resided in Las Vegas prior to passing and was instrumental in revitalizing that city’s downtown. Unfortunately, his last years were also marked by addiction to nitrous oxide, ketamine and alcohol, and episodes of increasingly erratic behavior that alarmed friends and family alike. Hsieh died in November 2020 at age 46, succumbing to injuries sustained from a house fire.
He never married and had no children. He left behind his mother, father, two brothers, and a fortune estimated at around a billion dollars. What Hsieh did NOT leave behind was an estate plan. At least, not one that anyone knew about.
Since he died intestate, the Clark County court in Nevada appointed Hsieh’s father and older brother to represent and administer the estate. Since then, the duo has been working to identify Hsieh’s extensive business interests. They have hired experts to comb through records, contacted his friends and professional associates. They have also had to decipher thousands of post-it notes Hsieh had taped to the walls of his home, scribbled with information about business transactions, people he promised money to, people who owed him money. All of this time and research has already drained the estate of millions.
Because no plan was found, Nevada intestacy law applies, which means his parents should be the sole beneficiaries of his net estate. However, there has been a bizarre new development that may take a wrecking ball to their inheritance.
A Will Is Found
In a dramatic turn of events, a last will and testament was discovered in February of this year. Signed by Hsieh ten years ago, it was found in the unlikeliest of places: among the personal effects of the recently deceased Mr. Pir Muhammad. No one in Hsieh’s circle seems to know how Muhammad and Hsieh knew one another, or the nature of their relationship. And because Muhammad suffered from dementia and Alzheimer’s in recent years, he apparently did not even know that Hsieh had died.
Hsieh states in the will that he entrusted the document to Muhammad in order to prevent anyone from tampering with it. The document refers to a “backup will” and to a supporting video – neither of which have been located. In the will he names two law firms as co-executors and directs his fortune to be distributed as follows:
- $50 million, as well as property worth millions, are directed to go into a trust. No one yet knows of a trust(s) or who the beneficiaries might be.
- $250,000 each for the Buffet Foundation, the Ford Foundation, the Gates Foundation and the Americares Foundation.
- $500,000 to both The American Red Cross and UNICEF.
- $3 million to Harvard University, Hsieh’s alma mater.
- Hsieh also included a no contest clause. This means that if any family member challenges the will, he/she gets nothing. (Note: No-contest clauses are not valid under Florida law.) There’s a big loophole to Hsieh’s strategy, though: if his parents successfully demonstrate that their son lacked the capacity to execute a will – probably not too big a stretch based on his history of drug addiction and mental instability – the will could be set aside. If set aside, his parents will inherit the entire net estate under Nevada intestacy law, not just the comparatively paltry $500,000 left to them in the will.
We do not yet know if they will challenge the validity of the will. The court is scheduled to take up the matter on May 22.
Takeaways For The Rest Of Us
There is much we can learn from Hsieh’s missteps:
- Consult with a qualified estate planning attorney. Avoid the do-it-yourself approach! Any ambiguity in language is kryptonite to the smooth handling of your estate after you pass on.
- Don’t wait to do your planning until things “settle down.” This is a common rationale for delay. The fact is, family circumstances and financial circumstances are always in flux. Do your planning while you are in good health, so your plan is less likely to be challenged. Recognize too that your plan is a living document; you can change it as life changes.
- Hsieh owned property in Nevada, Utah and other states. If you own multiple out-of-state properties, you are well advised to create a trust that owns the properties. Otherwise, there will have to be a probate proceeding in each state.
- Tell your loved ones where you keep your estate plan, and how to retrieve it.
- Create an inventory of your assets, and keep it updated. Make sure your trustee or personal representative knows where it is.
In conclusion, we point out that money is not the only measure of wealth. Peace of mind is valuable, too; in fact, it is priceless. When you create a sound estate plan, you give your family a precious gift: a roadmap to smooth the uneven terrain they will have to travel once you are gone.
The Karp Law Firm attorneys can help you create a plan that makes sense for you, and your family and financial situation. Call us at (561) 625-1100 to schedule your free initial consultation.
