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<p class="MsoNormal">Re the use of RCW 11.02.091 for passing of stock shares from one spouse to the other at death—I think that probably works because there is
<i>other</i> law allowing contracts between spouses to transfer assets at death: RCW 26.16.120 and the related case law. I think RCW 11.02.091 is supportive only, in preventing a challenge to such a contract on the basis that the arrangement fails to meet testamentary
requirements. Though I do think such a provision in a shareholder agreement possibly could be challenged if it isn’t signed by both spouses.<o:p></o:p></p>
<p class="MsoNormal"><o:p> </o:p></p>
<p class="MsoNormal">I think that’s an example of what RCW 11.02.091 was originally intended to do: bolster/supplement non-probate transfer arrangements that were created under other sources of law, by shielding them from challenge based on a failure to execute
with will formalities. I don’t think RCW 11.02.091 was intended to be, by itself, authority to create any type of non-probate transfer. But as my earlier post said at greater length, there’s no Washington case law on the scope of the statute yet, so I could
be 100% wrong.<o:p></o:p></p>
<p class="MsoNormal"><o:p> </o:p></p>
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<p class="MsoNormal">Sincerely,<o:p></o:p></p>
<p class="MsoNormal"><o:p> </o:p></p>
<p class="MsoNormal">Eric<o:p></o:p></p>
<p class="MsoNormal"><o:p> </o:p></p>
<p class="MsoNormal">Eric C. Nelsen<o:p></o:p></p>
<p class="MsoNormal">Sayre Law Offices, PLLC<o:p></o:p></p>
<p class="MsoNormal">1417 31st Ave South<o:p></o:p></p>
<p class="MsoNormal">Seattle WA 98144-3909<o:p></o:p></p>
<p class="MsoNormal">206-625-0092<o:p></o:p></p>
<p class="MsoNormal"><a href="mailto:eric@sayrelawoffices.com"><span style="color:#0563C1">eric@sayrelawoffices.com</span></a><o:p></o:p></p>
<p class="MsoNormal"><o:p> </o:p></p>
<p class="MsoNormal"><b><span style="background:aqua;mso-highlight:aqua">Covid-19 Update -
</span></b>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.<o:p></o:p></p>
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<p class="MsoNormal"><o:p> </o:p></p>
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<p class="MsoNormal"><b>From:</b> wsbapt-bounces@lists.wsbarppt.com <wsbapt-bounces@lists.wsbarppt.com>
<b>On Behalf Of </b>Karen E. Boxx<br>
<b>Sent:</b> Friday, September 17, 2021 6:37 PM<br>
<b>To:</b> WSBA Probate & Trust Listserv <wsbapt@lists.wsbarppt.com><br>
<b>Subject:</b> Re: [WSBAPT] LLCs and Probate<o:p></o:p></p>
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<p class="MsoNormal"><o:p> </o:p></p>
<p class="MsoNormal">Wouldn’t a provision in the LLC agreement be enforceable under RCW 11.02.091? you can, for example, include provisions in shareholders agreements that a deceased shareholder’s shares pass to the spouse on death.
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<p class="MsoNormal"><o:p> </o:p></p>
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<p class="MsoNormal"><b>From:</b> <a href="mailto:wsbapt-bounces@lists.wsbarppt.com">
wsbapt-bounces@lists.wsbarppt.com</a> <<a href="mailto:wsbapt-bounces@lists.wsbarppt.com">wsbapt-bounces@lists.wsbarppt.com</a>>
<b>On Behalf Of </b>Sarah McCarthy<br>
<b>Sent:</b> Friday, September 17, 2021 5:03 PM<br>
<b>To:</b> WSBA Probate & Trust Listserv <<a href="mailto:wsbapt@lists.wsbarppt.com">wsbapt@lists.wsbarppt.com</a>><br>
<b>Subject:</b> Re: [WSBAPT] LLCs and Probate<o:p></o:p></p>
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</div>
<p class="MsoNormal"><o:p> </o:p></p>
<p class="MsoNormal">Great input Eric, thank you! <o:p></o:p></p>
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<p class="MsoNormal" style="margin-bottom:12.0pt">Sarah<o:p></o:p></p>
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<p class="MsoNormal">Sent by dictation from my iPhone. Please excuse typos and missing punctuation!<o:p></o:p></p>
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<p class="MsoNormal" style="margin-bottom:12.0pt"><o:p> </o:p></p>
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<p class="MsoNormal" style="margin-bottom:12.0pt">On Sep 17, 2021, at 4:45 PM, Eric Nelsen <<a href="mailto:Eric@sayrelawoffices.com">Eric@sayrelawoffices.com</a>> wrote:<o:p></o:p></p>
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<p class="MsoNormal"> <o:p></o:p></p>
<p class="MsoNormal">I agree that probate is needed unless the estate qualifies for the small estate affidavit process. An LLC interest is intangible personal property and must pass by Will or intestacy.<o:p></o:p></p>
<p class="MsoNormal"> <o:p></o:p></p>
<p class="MsoNormal">The basic problem as I see it is, the LLC has to determine to whom it should transfer the decedent’s interest. To do that, the LLC needs a legal justification or authority that determines the proper person; if the LLC tries to decide on
its own and gets it wrong, it risks liability to the proper heirs and potentially decedent’s creditors.<o:p></o:p></p>
<p class="MsoNormal"> <o:p></o:p></p>
<p class="MsoNormal">I know that many people try to put provisions into an LLC to effect a transfer at death or some other pre-arrangement that would avoid probate. But I don’t think there is any statutory authority for that, unless perhaps the interest is
held JTWROS pursuant to the general provisions of <a href="https://app.leg.wa.gov/RCW/default.aspx?cite=64.28&full=true">
Ch. 64.28 RCW</a>. Even that I have never tried, never seen it done, and I’m not absolutely sure it would work. So having such a document might backfire, if the proper heirs under the Will differ from the person designated in the invalid TOD document.<o:p></o:p></p>
<p class="MsoNormal"> <o:p></o:p></p>
<p class="MsoNormal">Ordinary TOD provisions for specific assets are supported by statutory authority, such as the RCWs governing bank accounts or investment accounts, or the relatively new TOD deed for real property. I don’t know of any provisions in Ch. 25.15
RCW or elsewhere in the incorporation statutes that allow TOD of LLC interests. If there is no statutory authority, any attempt at a transfer-on-death document would be deemed a “testamentary instrument” which would have to be executed in accordance with the
Will formalities—basically, a Will specific to the asset, which likely would require probate or at least adjudication of testacy to put into effect.<o:p></o:p></p>
<p class="MsoNormal"> <o:p></o:p></p>
<p class="MsoNormal">On the effect of the LLC being a California LLC—I don’t think it matters. Since an LLC is an intangible personal property interest, it’s inherently mobile and considered possessed by the decedent at the decedent’s domicile for purposes
of determining jurisdiction. So long as the LLC management recognizes the authority of the PR to assign the interest, the CA court doesn’t need to get involved. After all, there is no State-run registry of LLC ownership the way vehicle certificates of title
are done.<o:p></o:p></p>
<p class="MsoNormal"> <o:p></o:p></p>
<p class="MsoNormal">Sincerely,<o:p></o:p></p>
<p class="MsoNormal"> <o:p></o:p></p>
<p class="MsoNormal">Eric<o:p></o:p></p>
<p class="MsoNormal"> <o:p></o:p></p>
<p class="MsoNormal">Eric C. Nelsen<o:p></o:p></p>
<p class="MsoNormal">Sayre Law Offices, PLLC<o:p></o:p></p>
<p class="MsoNormal">1417 31st Ave South<o:p></o:p></p>
<p class="MsoNormal">Seattle WA 98144-3909<o:p></o:p></p>
<p class="MsoNormal">206-625-0092<o:p></o:p></p>
<p class="MsoNormal"><a href="mailto:eric@sayrelawoffices.com"><span style="color:#0563C1">eric@sayrelawoffices.com</span></a><o:p></o:p></p>
<p class="MsoNormal"> <o:p></o:p></p>
<p class="MsoNormal"><b><span style="background:aqua;mso-highlight:aqua">Covid-19 Update -
</span></b>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.<o:p></o:p></p>
<p class="MsoNormal"> <o:p></o:p></p>
<div style="border:none;border-top:solid #E1E1E1 1.0pt;padding:3.0pt 0in 0in 0in">
<p class="MsoNormal"><b>From:</b> <a href="mailto:wsbapt-bounces@lists.wsbarppt.com">
wsbapt-bounces@lists.wsbarppt.com</a> <<a href="mailto:wsbapt-bounces@lists.wsbarppt.com">wsbapt-bounces@lists.wsbarppt.com</a>>
<b>On Behalf Of </b>Sarah McCarthy<br>
<b>Sent:</b> Friday, September 17, 2021 3:30 PM<br>
<b>To:</b> WSBA Probate & Trust Listserv <<a href="mailto:wsbapt@lists.wsbarppt.com">wsbapt@lists.wsbarppt.com</a>><br>
<b>Subject:</b> [WSBAPT] LLCs and Probate<o:p></o:p></p>
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<p class="MsoNormal"> <o:p></o:p></p>
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<p class="MsoNormal"><span style="font-size:18.0pt;font-family:"Garamond",serif">All -- </span><o:p></o:p></p>
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<p class="MsoNormal"><span style="font-size:18.0pt;font-family:"Garamond",serif"> </span><o:p></o:p></p>
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<p class="MsoNormal"><span style="font-size:18.0pt;font-family:"Garamond",serif">A few questions related to planning around multi-member LLCs after an LLC member passes:</span><o:p></o:p></p>
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<p class="MsoNormal"><span style="font-size:18.0pt;font-family:"Garamond",serif"> </span><o:p></o:p></p>
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<p class="MsoNormal"><span style="font-size:18.0pt;font-family:"Garamond",serif">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." </span><o:p></o:p></p>
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<p class="MsoNormal"><span style="font-size:18.0pt;font-family:"Garamond",serif"> </span><o:p></o:p></p>
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<p class="MsoNormal"><span style="font-size:18.0pt;font-family:"Garamond",serif">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).) </span><o:p></o:p></p>
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<p class="MsoNormal"><span style="font-size:18.0pt;font-family:"Garamond",serif"> </span><o:p></o:p></p>
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<p class="MsoNormal"><span style="font-size:18.0pt;font-family:"Garamond",serif">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. </span><o:p></o:p></p>
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<p class="MsoNormal"><span style="font-size:18.0pt;font-family:"Garamond",serif"> </span><o:p></o:p></p>
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<p class="MsoNormal"><span style="font-size:18.0pt;font-family:"Garamond",serif">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...) </span><o:p></o:p></p>
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<p class="MsoNormal"><span style="font-size:18.0pt;font-family:"Garamond",serif"> </span><o:p></o:p></p>
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<p class="MsoNormal"><span style="font-size:18.0pt;font-family:"Garamond",serif">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? </span><o:p></o:p></p>
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<p class="MsoNormal"><span style="font-size:18.0pt;font-family:"Garamond",serif"> </span><o:p></o:p></p>
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<p class="MsoNormal"><span style="font-size:18.0pt;font-family:"Garamond",serif">Thanks for any input! </span><o:p></o:p></p>
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<p class="MsoNormal"><span style="font-size:18.0pt;font-family:"Garamond",serif">Sarah </span><o:p></o:p></p>
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<p style="margin:0in"><b><span style="font-family:"Arial",sans-serif;color:black">Sarah O’Farrell McCarthy</span></b><o:p></o:p></p>
<p style="margin:0in"><b><span style="font-family:"Arial",sans-serif;color:black">(Pronouns: she / her)<br>
</span></b><span style="font-family:"Arial",sans-serif">Attorney | <span style="color:black">
Kelly, Arndt & Walker, Attorneys at Law, PLLP</span></span><span style="color:#1F497D"><br>
</span><span style="font-family:"Arial",sans-serif;color:black">P.O. Box 290 | 6443 Harding Avenue | Clinton, WA 98236</span><o:p></o:p></p>
<p style="margin:0in"><span style="font-family:"Arial",sans-serif;color:black">(Located on Whidbey Island, Island County, Washington)<br>
Phone: (360) 341-1515 | Fax: (360) 341-3272</span><span style="color:black"><br>
</span><span style="font-family:"Arial",sans-serif;color:#222222"><a href="mailto:sarah@kawlawyers.com">sarah@kawlawyers.com</a></span><span style="color:#1F497D"> </span><span style="color:black">|
<a href="http://www.kawlawyers.com" target="_blank">www.kawlawyers.com</a></span><o:p></o:p></p>
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