Can LLC Operating Agreement Transfer Shares Upon Member’s Death?

Jon Alper Estate Planning

An earlier blog post addressed a question about directing ownership of a deceased LLC member’s membership interest . The post said that an LLC operating agreement cannot direct the inheritance of an LLC interest, and that each member should provide for inheritance in their will or living trust. A Florida court decision since that post holds that LLC operating agreements may properly provide for the inheritance of a LLC interest.

The appellate court held that the express language in a contractual agreement, including an LLC operating agreement, trumps conflicting testamentary provisions of a will or trust. Parties may provide in an LLC contractual operating agreement how LLC interests will be transferred and owned upon a member’s death. If a the agreement provides what happens to a deceased member’s LLC interest immediately upon his death that provision should keep the interest outside of the decedent’s probate estate. The operating agreement should state that the transfer vests immediately upon a member’s death in the name of the designated heir.

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