Florida law appears to recognize an LLC Member’s right to control the disposition of his or her membership interest in an LLC upon death, without judicial intervention via a probate administration. One of the goals of many clients seeking estate planning advice from a lawyer is how to avoid probate. The attorney may suggest different mechanisms a client can use to minimize the value and source of assets which become part of the probate estate. Apparently, a properly drafted limited liability operating agreement which includes a transfer on death provision, may achieve this objective.
In Blechman vs Estate of Blechman, 160 So.3d 152 (Fla. App. 2015), the Fourth District Court of Appeal confirmed that a provision in an LLC operating agreement assigning a member’s interest upon death, will trump a contrary provision in a will. In so holding the Court stated, “The situation here is analogous to our decision in Murray Van & Storage, where we held that the specific provisions of a “buy-sell” agreement between corporate stockholders trumped a conflicting disposition of corporate shares through a will”.
This ability to avoid probate with an operating Agreement proves significant when advising a client who owns rental real estate property, and either has transferred the property into the name of an LLC entity or would like to do so. Of course, titling the name of the rental property in the name of an LLC may be desired to achieve some level of protection against personal liability from suits arising out of the operation and ownership of the property(i.e. from a slip and fall at the property). The Court’s holding suggests that probate avoidance can also be achieved.
The Court further stated, “In this case, by virtue of Section 6.3(a)’s default provision, the Deceased’s membership interest immediately passed outside of probate to his children upon his death, thus nullifying his testamentary devise as an attempted disposition of property not subject to his ownership. See In re Estate of Corbitt, 265 Ga. 110, 454 S.E.2d 129, 130 (1995) (“The effect of the invalidity of a bequest (or the ademption thereof) would be to render the bequest void, but not to invalidate the will and it is no ground of caveat to the probate of a will that a devise to a particular person may be void.” (internal quotation omitted)).
If you would like to discuss any matters relating to probate or estate planning with a Fort Lauderdale estate planning attorney, please contact our office today to schedule a free consultation.