[WSBAPT] Nonprobate Transfer of LLC Interest in an Operating Agreement

[Bryce Dille]

Our office had a case similar to this and although we settled on other issues crt made prelim ruling that this could not prevail over provisions in will to the contrary since agreement could not operate as will since it was not executed with will requirements. To avoid this could give 3rd party right to purchase interest at nominal amount then estate could be obligated to sell

Sent from my iPhone

On Jan 25, 2018, at 10:50 AM, Eric Reutter <eric at tnguyenlaw.com<mailto:eric at tnguyenlaw.com>> wrote:

Hi all,

Fairly quick question here regarding transfer of an LLC interest:

If an LLC Operating Agreement has appropriate language designating a transfer of the interest to another party, will that language effectuate a nonprobate transfer of the LLC interest? If so, what statute or case law in Washington do we rely on for the validity of this transfer?

For example, assume an individual is a sole member of an LLC and had a provision similar to the following:

Sole Member designates the following transfer-on-death beneficiaries to acquire, upon Sole Member’s death, Sole Member’s entire Interest existing at the time of Sole Member’s death: [John Doe of Bellingham, WA]

Although I have found supporting authority for this nonprobate transfer language in other states and in national publications, I have not found a clear Washington statute or case law that directly addresses this. For example, the Uniform Probate Code, Section 6-101 typically authorizes such a disposition, but I do not believe that Washington directly adopted Section 6-101. Also, the Florida case of Blechmen v. Estate of Blechmen clarified this nonprobate transfer issue nicely in Florida, but I have not found a similar Washington case.

I also found a national law article ("Issues Arising upon the Death of the Sole Member of a Single-Member LLC" from the Marquette Law Review) that explained that "No express provision of the Uniform LLC Acts or typical state LLC statutes forbids the use of transfer-on-death provisions in an LLC operating agreement. Consequently, as long as the member complies with the jurisdiction’s transfer-on-death statute, no barrier seemingly exists to this technique."

I would be grateful for a quick citation to the statue or case law we rely on in Washington for a nonprobate transfer of an LLC interest in an Operating Agreement.

Best regards,

Eric Reutter, J.D., LL.M.
Law Office of Theresa Nguyen, PLLC
707 S Grady Way, Suite 600 | Renton, WA 98057
Ph. 425.998.7295<tel:(425)%20998-7295> | Fax 425.420.2695<tel:(425)%20420-2695>
www.tnguyenlaw.com<http://www.tnguyenlaw.com/> | eric at tnguyenlaw.com<mailto:theresa at tnguyenlaw.com>

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