Takeaways from the Surprise Will of Tony Hsieh

Who Was Tony Hsieh?

Tony Hsieh was the founder of Zappos, an online retailer best known for its selection of shoes. Zappos was a successful venture which was ultimately sold to Amazon in 2009 in an all-stock deal worth $1.2 billion. Unfortunately, Hsieh unexpectedly passed away at just 46 years old during a house fire in 2020.

Did Tony Hsieh Have An Estate Plan?

Despite having an estate estimated to be worth hundreds of millions, all evidence previously pointed towards the conclusion that Hsieh died intestate, meaning without a Will. And for the last four or so years, the distribution of his estate has been handled as such. Meaning that despite his estate being worth hundreds of millions of dollars, his family, beneficiaries, and creditors have been going through the probate process.

All the progress made so far could be turned on its head after a court filing this week purports to contain the late entrepreneur’s Will.

What's In The Surpise Will?

The Will contains several specific distributions, including $50 million and real estate to several trusts, $3 million to his alma mater Harvard University, $1 million to STRYV365, a nonprofit helping youth affected by trauma, $500,000 each to UNICEF and the American Red Cross, $250,000 each to the Buffet Foundation, Americares Foundation, and the Gates Foundation, and other bequests of varying amounts to friends and family.

Why Did Nobody Know Until Now?

So where has this Will been for the past four years? According to court filings, it has been in the possession of Pir Muhammad, one of the five witnesses that signed the document. At the time of the filing however, Mr. Muhammad had passed away, was suffering from Alzheimer’s disease during his life, and unaware was that Tony Hsieh had died.

It appears that no one else knew about the Will because, as the document states, Hsieh “structured [his] way of surprising and leaving essentially all my beneficiaries to experience the ‘WOW’ factor in their life.” Muhammad was also given exclusive possession of the Will, so his incapacity and subsequent death were a major factor in its absence.

What Is Intestate Succession?

Every jurisdiction in the United States has an Intestacy Statute, which is the default for how your assets will be distributed if you do not prepare otherwise. A Will allows you to override the Intestacy Statute by changing the distribution of your assets. The distribution of your assets is done through a process called Probate, which enforces your wishes through a court order.

Assuming this Will is legitimate, Hsieh definitely did not want the distribution of his estate to be governed by the Nevada Intestacy Statute, as evidenced by the distributions of cash and real estate to various trusts, the donations to various charitable foundations, and specific bequests to family members, assuming the Will is actually his.

Best Practices An Effective Estate Plan

While it’s understandable for high-net-worth individuals to experience some paranoia about their beneficiaries knowing what they’re going to receive ahead of time or worrying about family members conveniently “forgetting” about the Will to cut out other beneficiaries, the big mistake here was keeping everyone other than Pir Muhammad in the dark about the Will’s existence.

Tell Your Fiduciaries Beforehand

It’s best practice to tell the people you’ve appointed to fiduciary roles in your estate plan about these roles ahead of time. This means your Successor Trustee, Personal Representative, Healthcare Surrogate, and Power of Attorney know their role before something happens to you.

In Hsieh’s case, informing his chosen Personal Representative ahead of time would have put this Personal Representative on notice to be on the lookout for his Will back in 2020. If his Personal Representative knew to contact Pir Muhammad, perhaps the last four years would’ve looked differently.

Have Backups For Your Fiduciary Roles

It’s also best practice to name backups for these fiduciary roles. You’d do this by listing three people to serve in the order you want them to serve. This potentially stops self-interested individuals from stepping in by keeping them out of the running.  So, if your first choice cannot serve, there are two more people named in the document to serve in that role before a court substitutes its judgment for yours.

This would’ve helped in Hsieh’s case by having someone other than Muhammad know about the Will. Potentially due to his unfortunate poor health and subsequent death, the one person Hsieh entrusted to make sure his Will has enforced, was not able to do so. By having a backup person know about the Will, someone else could have stepped in and informed the court about the Will before so much time had gone by.

What Comes Next?

A court hearing in the matter has been set for May. What comes next is anyone’s guess. I imagine there’ll be questions as to the validity of the Will, and resolving that question could become a yearslong endeavor in and of itself.

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