Can a Will Override an LLC Operating Agreement in Alaska? | Alaska Estate Planning

Disclaimer: This is general information, not legal advice. I am not a lawyer. For guidance tailored to your facts, consult an Alaska-licensed attorney.

Detailed Answer

Overview

Under Alaska law, the operating agreement of a limited liability company (LLC) typically governs how membership interests are handled. A last will and testament can direct how your personal property — including many economic rights in a business — passes at death. However, a will cannot unilaterally override contract terms in an operating agreement that limit transfers or create buyout rules for a membership interest. In practice, whether your son receives your LLC interest on death depends on the operating agreement’s language and Alaska law governing LLC interests and estates.

How Alaska law treats LLC interests

Many state LLC laws (including Alaska’s LLC statutory scheme, Title 10, chapter 50) treat a member’s interest as composed of two separate components:

Economic rights (distributions, share of profits and losses), often called a “transferable interest” or “economic interest”;
Management and voting rights (the right to participate in LLC governance), which are often nontransferable unless the operating agreement allows it.

Because these components are distinct, a will can effectively pass your economic/transferable interest to your beneficiary (your son) unless the operating agreement expressly prohibits such a transfer. But even when the beneficiary inherits the economic interest, the beneficiary may not automatically become a full member with governance rights. Instead, the operating agreement may require member consent, a buyout, or provide a right of first refusal to remaining members.

Typical restrictions you may see in an operating agreement

Right of first refusal: Other members get the option to buy your interest before an outside transferee (including heirs) can acquire it.
Buy-sell or death purchase provisions: The LLC may be required to buy your interest at a formula or appraisal price when you die.
Consent requirements: Transfer of membership or admission of a new member may require the consent of a majority or all members.
Assignment-only clause: The agreement may permit assignment of economic rights but preserve management rights solely for existing members.

Hypothetical example

Imagine you own 40% of an Alaska LLC. The operating agreement says that on a member’s death the LLC must buy the deceased member’s interest at fair market value and that no transferee becomes a member without unanimous consent. You leave your LLC interest to your son in your will. Under that operating agreement, your son would likely inherit your economic interest (the right to receive payments from the buyout or distributions), but the LLC could force a buyout or refuse to admit him as a member unless the members consent. The will would not force the LLC to ignore its buy-sell provision or consent requirement.

Why a will cannot generally “override” an operating agreement

An operating agreement is a contract among members and governs the LLC’s internal affairs. Courts enforce written contracts and statutory rules governing LLCs. A will transfers property you own, but it cannot rewrite a contract to which you are a party after your death. If the operating agreement contains valid transfer restrictions, the LLC and the other members can enforce those restrictions against your estate or heirs.

Relevant Alaska law

Alaska’s LLC statutes address the nature of membership interests, transfers, and the effect of operating agreements on member relations. See the Alaska Statutes governing limited liability companies (Title 10, chapter 50): https://www.akleg.gov/basis/statutes.asp#10.50. For probate and wills generally, see Alaska probate statutes in Title 13: https://www.akleg.gov/basis/statutes.asp#13. Review the operating agreement carefully and consult an attorney to interpret how these statutes and your agreement interact with your will.

Practical outcomes and considerations

If the operating agreement allows assignment of economic rights on death, your son may receive distributions but not managerial control.
If the operating agreement contains buyout or death provisions, the LLC may be able to purchase your interest rather than admit your son as a member.
If the operating agreement is silent or ambiguous, Alaska statutory default rules may apply; outcomes then depend on statutory language and courts may need to interpret intent.
If you want your son to step into all membership rights, you should ensure the operating agreement and any buy-sell agreements allow admission of heirs or expressly provide transfer-on-death terms.

Recommended next steps

Locate and read the LLC’s operating agreement and any buy-sell or shareholder agreements.
Look for clauses titled “transfer,” “assignment,” “death of a member,” “right of first refusal,” or “buyout.”
If you want your son to receive full membership rights, consider amending the operating agreement now while you’re able, with the required member approvals.
Coordinate estate planning and business documents. A will alone may not achieve your business succession goals; consider a transfer-on-death provision, life insurance-funded buy-sell, or a formal succession plan written into the operating agreement.
Consult an Alaska attorney who practices business and estate law to draft or amend agreements and to advise how a will will interact with your LLC documents under Alaska law.

Helpful Hints

Do not assume a will alone transfers management rights. Management often requires separate admission to the LLC.
Check for mandatory buyout rules at death; your estate might receive cash instead of passing the business to your heir.
Amend the operating agreement now if you want different transfer rules later. Changes usually require member approval spelled out in the agreement.
Consider a buy-sell funded by life insurance if you want a smooth cash buyout for heirs or remaining owners.
Keep estate and business plans aligned: inconsistent documents create disputes and delays for heirs and co-owners.
Have your estate documents reviewed periodically; business needs and membership structures change over time.

For quick access to Alaska law referenced above, see the Alaska Statutes pages for Title 10 (LLCs) and Title 13 (probate and wills):

If you want help locating specific clauses or preparing documents, I can outline the clauses to look for or provide a checklist to bring to an attorney.