[WSBAPT] LLCs and Probate

[Sarah McCarthy]

All --

A few questions related to planning around multi-member LLCs after an LLC
member passes:

1.  I'm looking for a confirmation or clarification of the following
understandings:  It's my understanding that probate is generally needed to
legally transfer an LLC member's interest in the LLC, unless the member had
a RLT and had previously assigned to the trustee of the RLT all of the
member's interests in the LLC.   I note that RCW 25.15.251(6)(b) talks
about a member's "transferable interest" being "held in a trust or estate,"
or being "held by a trustee, personal representative, or other fiduciary."

So, I take this to mean that, once an LLC member dies, assuming there is no
RLT in place, generally, in order to transfer the LLC member's interest
according to the will or by intestacy, in that case we need to file a
probate in order to have a PR appointed, and that court-appointed PR THEN
has the necessary legal authority to sign an "assignment" of LLC interests
to the appropriate heir/beneficiary, which would be maintained on file with
the LLC records.  (Though if the LLC interest fell below $100k in value, I
imagine a small estate affidavit could work, since the statute also states
that an LLC member interest is "personal property." RCW 25.15.246(1).)

2.  Is there an easy work around to this issue?... Are there provisions
that can be included in an LLC Operating Agreement that could provide
for/authorize some genre of "transfer on death certificate" that each
member could sign in advance of death, and file with the LLC records, which
the LLC manager could then effectuate upon a member's death, without a PR
needing to be appointed for the member's estate? I'm looking at RCW
25.15.246, which seems to provide for a means by which an operating
agreement can authorize the issuance of certificates of interests to a
transferee... I'm wondering if the probate is truly necessary, if the
members can agree on a means of addressing this issue in advance by means
of the operating agreement, or a buy-sell agreement.  Kind of like a
revocable transfer on death deed that we can record in advance for real
property.

I have these questions for Washington LLCs, as well as for Washington
residents who hold member interests in LLCs in other states, such as CA...
(though I do realize that LLCs are creatures of state law, so a review of
the CA LLC statutes may be necessary...)

3.  Does anyone know, under California law, is an ancillary/California
probate needed in order to appoint a CA-PR to transfer CA LLC member
interests?  Or, can we assume that a Washington probate will suffice, to
appoint a Washington PR, who would then have authority to assign out member
interests in the CA LLC?

Thanks for any input!

Sarah


*Sarah O’Farrell McCarthy*


*(Pronouns: she / her)*Attorney | Kelly, Arndt & Walker, Attorneys at Law,
PLLP
P.O. Box 290 | 6443 Harding Avenue | Clinton, WA  98236

(Located on Whidbey Island, Island County, Washington)
Phone: (360) 341-1515 | Fax: (360) 341-3272
sarah at kawlawyers.com | www.kawlawyers.com


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