[WSBAPT] Transferring LLC Units

[Joshua McKarcher]

Eric,

I am loathe ever to disagree with you – it feels riskier than taking a fiduciary assignment! -- but may I offer https://app.leg.wa.gov/RCW/default.aspx?cite=11.02.091 into evidence, and particularly (2)(c)and (3) “contract”.

I think LLC agreements may be among the primary kinds of agreements this statute is aimed at. Others can fight the validity of the LLC agreement on ordinary contract-validity grounds, but I don’t think they can assert the transfer to the other member is invalid because it is testamentary.

Open to other views. 😉

All my best, Josh

From: wsbapt-bounces at lists.wsbarppt.com <wsbapt-bounces at lists.wsbarppt.com> On Behalf Of Jeff at bellanddavispllc.com
Sent: Thursday, July 7, 2022 4:46 PM
To: 'WSBA Probate & Trust Listserv' <wsbapt at lists.wsbarppt.com>
Subject: Re: [WSBAPT] Transferring LLC Units

This is all very interesting.  The problem I have is I did not do the “older” member’s estate plan.  They are married, most likely have and CPA, so if older member dies first that person’s Will would not be probated.  That member also has children who think the other member is a “gold digger.”  I am trying to get copies of what EP documents they have to see what can be done.  However, what happens if you sign an operating agreement like a Will?  How will that insure the transfer is made.  Would it not be better to do a separate “Buy-Sell” for a nominal sum?

Jeff

W. Jeff Davis
BELL & DAVIS PLLC
P.O. Box 510
720 E. Washington Street, Suite 105
Sequim WA 98382
Phone: (360) 683.1129
Fax: (360) 683.1258
email: jeff at bellanddavispllc.com<mailto:jeff at bellanddavispllc.com>
www.bellanddavispllc.com<http://www.bellanddavispllc.com/>

The information contained in this e-mail message may be privileged, confidential, and protected from disclosure. If you are not the intended recipient, any dissemination, distribution, or copying is strictly prohibited. If you think that you have received this e-mail message in error, please e-mail the sender at info at bellanddavispllc.com<mailto:info at bellanddavispllc.com>  or call 360.683.1129.


From: wsbapt-bounces at lists.wsbarppt.com<mailto:wsbapt-bounces at lists.wsbarppt.com> <wsbapt-bounces at lists.wsbarppt.com<mailto:wsbapt-bounces at lists.wsbarppt.com>> On Behalf Of Eric Nelsen
Sent: Thursday, July 7, 2022 3:31 PM
To: WSBA Probate & Trust Listserv <wsbapt at lists.wsbarppt.com<mailto:wsbapt at lists.wsbarppt.com>>
Subject: Re: [WSBAPT] Transferring LLC Units

I’m against having such a provision in the LLC documents, and agree that it would have to be executed with testamentary formalities in order to be valid.

My analysis has been that an ownership interest in an LLC is an asset, just like a stock share. In every other instance of a non-probate transfer of an asset at death, there is an enabling statute that provides for survivorship: bank accounts, transfer on death deeds, pay-on-death accounts, etc. There is no enabling statute in the LLC rules that authorizes survivorship of an ownership interest. Therefore, it would have to be a testamentary disposition, and so must meet the formalities of a will.

At most, I have included in the LLC agreement a right of first refusal, mandatory buy-back, or some other mechanism for the deceased individual’s share to be purchased or otherwise cashed out from their Estate. Those are merely restrictions on transfer, and so aren’t testamentary and would be valid (assuming no violation of the common-law prohibition against restraints on alienation).

Sincerely,

Eric

Eric C. Nelsen
Sayre Law Offices, PLLC
1417 31st Ave South
Seattle WA 98144-3909
206-625-0092
eric at sayrelawoffices.com<mailto:eric at sayrelawoffices.com>

Covid-19 Update - All attorneys are working remotely during regular business hours and are available via email and by phone. Videoconferencing also is available. Signing of estate planning documents can be completed and will be handled on a case-by-case basis. Please direct mail and deliveries to the Seattle office.

From: wsbapt-bounces at lists.wsbarppt.com<mailto:wsbapt-bounces at lists.wsbarppt.com> <wsbapt-bounces at lists.wsbarppt.com<mailto:wsbapt-bounces at lists.wsbarppt.com>> On Behalf Of Jeff at bellanddavispllc.com<mailto:Jeff at bellanddavispllc.com>
Sent: Thursday, July 7, 2022 2:33 PM
To: 'WSBA Probate & Trust Listserv' <wsbapt at lists.wsbarppt.com<mailto:wsbapt at lists.wsbarppt.com>>
Subject: [WSBAPT] Transferring LLC Units

Listmates:

Two member LLC.  They are not related and each is married (to different people).  They want a deceased member’s Units to go to the surviving member.  I know it can be done with a Will.  But can members enter into an agreement, or better yet, amend the operating agreement to say that a deceased member’s units go to the surviving member.  If you do it that way, must the agreement be signed like a Will?

Your thoughts.

Jeff Davis

W. Jeff Davis
BELL & DAVIS PLLC
P.O. Box 510
720 E. Washington Street, Suite 105
Sequim WA 98382
Phone: (360) 683.1129
Fax: (360) 683.1258
email: jeff at bellanddavispllc.com<mailto:jeff at bellanddavispllc.com>
www.bellanddavispllc.com<http://www.bellanddavispllc.com/>

The information contained in this e-mail message may be privileged, confidential, and protected from disclosure. If you are not the intended recipient, any dissemination, distribution, or copying is strictly prohibited. If you think that you have received this e-mail message in error, please e-mail the sender at info at bellanddavispllc.com<mailto:info at bellanddavispllc.com>  or call 360.683.1129.


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