If you own or co-own a Limited Liability Company (LLC), you may wonder what happens to your ownership interest when you pass away. A common question is:
Does an LLC go through probate?
The short answer: Yes, your personal ownership interest in an LLC can go through probate — unless you’ve planned ahead to transfer it automatically through your operating agreement, a trust, or other legal tools.
In this article, we’ll explain:
- What probate is and how it affects LLCs
- When and why an LLC goes through probate
- How to avoid probate with proper planning
- What happens to an LLC if a member dies
- Estate planning tips for LLC owners
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What Is Probate?
Probate is the legal process through which a deceased person’s assets are reviewed, validated, and distributed according to their will — or state law if there is no will.
Assets subject to probate typically include:
- Personal property
- Real estate
- Bank accounts without beneficiaries
- Business interests like LLC ownership (if not otherwise transferred)
Probate can be costly, time-consuming, and public. That’s why many LLC owners want to avoid having their business interests pass through probate.
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Does an LLC Automatically Go Through Probate?
Not the LLC itself — but the deceased member’s ownership interest in the LLC may go through probate.
Here’s how it works:
- If a member of an LLC dies and their interest is part of their personal estate, it will be subject to probate unless otherwise arranged.
- The LLC continues to exist, but the ownership stake is treated like any other asset in probate court.
If there’s no estate plan or operating agreement with succession provisions, the ownership interest will be distributed by state law — often to next of kin.
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What Happens to an LLC If a Member Dies?
It depends on:
- The LLC Operating Agreement
- State default laws
- Whether estate planning was done
Scenarios include:
- The deceased member’s interest is inherited by heirs through probate
- The LLC buys out the deceased member’s interest (per the agreement)
- The heirs become new members, if allowed
- The LLC is dissolved (in rare cases if no plan exists)
An operating agreement should clearly define what happens when a member dies — including buy-sell provisions, valuation methods, and transfer restrictions.
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How to Avoid Probate for Your LLC
To keep your LLC interest out of probate, consider these strategies:
- Add a Transfer-on-Death Clause in Your Operating Agreement
– Allows automatic transfer of ownership to a named beneficiary - Use a Revocable Living Trust
– Transfer your LLC interest into a trust while alive
– Upon your death, the trust transfers ownership directly to your beneficiaries without court involvement - Set Up a Buy-Sell Agreement
– Establishes how the LLC will handle the buyout of a deceased member’s interest
– Often funded by life insurance - Designate a Successor in Your Will
– Still subject to probate but at least provides clear instructions
Talk to an estate planning attorney to determine which option is best for your business and family.
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Example
John owns a 50% share in a two-member LLC. He passes away without a trust or operating agreement. His share becomes part of his estate and goes through probate. His spouse may inherit the interest — but the surviving LLC member could be forced to do business with someone they never intended as a partner.
With proper planning, John could have transferred his interest to his spouse or children outside of probate — or allowed the LLC to buy back his share automatically.
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Final Thoughts
Yes — an LLC interest can go through probate if no proactive legal or estate planning steps are taken. While the LLC itself doesn’t go through probate, your ownership stake is treated like any personal asset and could be tied up in court.
To protect your business, your partners, and your family:
- Create a detailed LLC operating agreement
- Add succession or transfer-on-death provisions
- Consider placing your LLC interest in a trust
- Work with a qualified attorney for estate planning
Need help forming your LLC with a strong operating agreement or BOI filing? FormLLC makes LLC setup and compliance easy — across all 50 states.
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