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

Fri Jan 26 08:48:43 PST 2018

The ACTEC listserv had a string on this very issue within the  last week, and my recollection of the responses was that they ranged from “probably doesn’t work” to “probably does work,” with most saying it depends upon state law. The takeaway for me is, when in doubt, use a will. I tend to have a bias against non-probate devises where they can be avoided, because of the risk that they are forgotten about some years later, the testator signs a new will thinking she has changed the disposition of the asset in question, and the year’s old non-probate designation prevails over the terms of the will.

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THOMAS M. CULBERTSON  I  Lukins & Annis, PS
717 W. Sprague Ave, Suite 1600, Spokane, WA 99201
(509) 455-9555  I  fax (509) 363-2500  I  tculbertson at lukins.com<mailto:tculbertson at lukins.com>

From: wsbapt-bounces at lists.wsbarppt.com [mailto:wsbapt-bounces at lists.wsbarppt.com] On Behalf Of nestor at pplsweb.com
Sent: Thursday, January 25, 2018 1:15 PM
To: 'WSBA Probate & Trust Listserv'
Subject: Re: [WSBAPT] Nonprobate Transfer of LLC Interest in an Operating Agreement

Can membership interests be issued in the form of a certificate with POD language that would overcome this? This of course can be approved by language in the Operating agreement permitting POD designations.

Nestor Gorfinkel, Attorney at Law
Licensed in Washington & Florida
Florida Civil-Law (International) Notary

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From: wsbapt-bounces at lists.wsbarppt.com<mailto:wsbapt-bounces at lists.wsbarppt.com> [mailto:wsbapt-bounces at lists.wsbarppt.com] On Behalf Of Bryce Dille
Sent: Thursday, January 25, 2018 12:59 PM
To: WSBA Probate & Trust Listserv <wsbapt at lists.wsbarppt.com<mailto:wsbapt at lists.wsbarppt.com>>
Subject: Re: [WSBAPT] Nonprobate Transfer of LLC Interest in an Operating Agreement

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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