Zappos online shoe store is one of the great business success stories of the Internet era. It all began in 1999 when an entrepreneur named Nick Swinmurn left a voicemail for Venture Frogs cofounder Tony Hsieh.
Sminmurn was looking for start-up capital to launch an e-commerce website that would sell shoes, and Hsieh was not interested when he started listening. He was ready to move on to the next call when Swimmurn mentioned the fact that footwear was a $40 billion a year industry.
The size of the market got Hsieh’s attention, and there was little-to-no competition on the Internet at that time. Hsieh, who started Venture Frogs after selling LinkExchange to Microsoft for $265 million when he was 24, decided to back the idea.
Two months after the call came through, Hsieh joined the fledgling company as the CEO, and Swinmurn came up with the Zappos name. It was a play on zapatos, which is the Spanish word for shoes.
They implemented a customer friendly framework, and they began to establish relationships with vendors. The business caught fire, and it grew by leaps and bounds until Swinmurn left the company in 2006. At that time, Hsieh’s Venture Frogs partner Alfred Linn came into the fold.
In 2008, annual sales reached the $1 billion mark, and Amazon was interested in acquiring Zappos. They worked out a $1.2 billion deal, and Hsieh stayed on as the CEO for another 10 years or so.
He retired in August of 2020 with a reported net worth of $840 million.
Tragic House Fire
Hsieh was visiting a friend in Connecticut in November just three months after his retirement when the house that he was staying in caught fire. He was hospitalized for burns and smoke inhalation, and he succumbed from the complications on November 27th at the age of 46.
No Estate Plan
He was not married and he had no children, and he is survived by his two brothers and his parents. His older brother and his father have asked the court to appoint them as the estate administrators, and they have stated that Tony did not have a will or a trust when he passed away.
Zappos was originally located in San Francisco, but when the business took hold and they needed more space, they didn’t want to pay Bay Area prices.
Hsieh was a poker enthusiast, and Las Vegas had an appealing business environment, so they moved their operations to Vegas. He embraced the town wholeheartedly, and he invested a lot of money in downtown revitalization projects.
Since he was a resident of Nevada when he passed away, his estate will be transferred under the intestate succession laws of that state. Under these laws, his parents will be the sole heirs to the $840 million estate. No one will ever know if this is consistent with his true wishes.
Estate Tax Considerations
The federal estate tax is a major factor for high net worth individuals like Tony Hsieh. There is an exclusion that can be used to transfer a certain amount tax free, and the remainder is potentially subject to the estate tax and its 40 percent rate.
At the time of his passing in 2020, the exclusion was $11.58 million. That’s a lot of money for most people, but it doesn’t go far when you are applying it to an $840 million sum.
There are steps that he could have taken to mitigate the estate tax exposure, and we do not know how his assets were positioned. However, since he did not have any estate planning documents in place, it is logical to assume that his parents may be looking at an unnecessarily heavy tax burden.
Take Action Today!
Someone with this type of wealth is in a unique position, but intestacy is really not an option for any responsible adult. If you are going through life without an estate plan, action is required.
There is no one-size-fits-all estate plan that is right for everyone, and there are many approaches that can be taken. When you choose our firm, we will work with you to develop a plan that is custom crafted to ideally suit your needs.
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