Detailed answer

Short answer: If an LLC operating agreement does not say what happens to a member’s interest upon death, Delaware’s Limited Liability Company Act sets default rules. The deceased member’s economic interest (the right to distributions and allocations of profit and loss) typically passes to the member’s estate or heirs under probate or the member’s will. However, management and voting rights generally do not automatically pass to the heir or estate to the same extent—those rights often require the consent of the surviving members unless the operating agreement or the company’s formation documents say otherwise.

Key legal framework

Delaware’s LLC statute (Title 6, Chapter 18) provides the statutory background that governs membership interests when an operating agreement is silent. See the Delaware Limited Liability Company Act: 6 Del. C. Ch. 18.

What is an LLC membership interest under Delaware law?

Under Delaware law, a member’s interest is generally split into several parts: (1) economic rights (distributions and allocations), (2) contractual rights under the operating agreement, and (3) governance rights (management and voting). Delaware treats the economic component as assignable property, but governance rights are personal and usually only pass if other members agree to admit the transferee.

Practical consequences when a member dies

• Economic rights pass to the estate or heirs: The deceased member’s economic interest usually becomes part of the probate estate or passes under the member’s will or beneficiary designation. The executor or heirs can typically receive distributions and share in allocations of profits and losses.
• Management and voting rights usually do not automatically transfer: Unless the operating agreement or members’ unanimous action provides otherwise, the heir or estate often does not become a full member with management or voting authority. Instead, the transferee holds only the economic interest as an assignee until (and unless) the other members admit them as a member.
• Estate can enforce contractual and information rights: The personal representative or heirs typically can pursue enforcement of contractual rights and request company books and records, subject to the LLC Act and any company policies.
• Possible business disruptions: Silence in the operating agreement can cause uncertainty: other members may seek to buy out the estate, the company might change managers, or members might consider dissolution if the relationship was closely personal.

Why these distinctions matter

Management and control determine who runs the company. If governance rights pass automatically to heirs, management could transfer to people the other members did not choose. Delaware’s default approach protects the LLC and the remaining members by separating transferable economic interests from personal governance rights unless the members agreed otherwise.

Typical resolutions when the agreement is silent

• Admission of transferee: Members can vote to admit the heir or executor as a member, giving them full rights.
• Buyout by the LLC or remaining members: The company or members can negotiate a purchase of the deceased’s economic interest, often funded by life insurance or cash reserves.
• Amend the operating agreement: The LLC can adopt an amendment providing clear procedures for future deaths to avoid repeated disputes.
• Probate actions: The estate representative may need to take probate steps to collect distributions or assert contractual rights.

Where to find the law

For a review of the statutory defaults that apply when an operating agreement is silent, see the Delaware Limited Liability Company Act: 6 Del. C. Ch. 18. The Act contains provisions about transferable interests, rights of assignees, and member admission that frame these outcomes.

Important: This explanation summarizes typical Delaware default rules. Specific outcomes can vary based on the LLC’s certificate of formation, any side agreements, and the facts of an estate or probate matter.

Disclaimer: This is general information and not legal advice. It does not create an attorney-client relationship. For guidance tailored to your company and estate, consult a licensed Delaware attorney who handles LLC and probate matters.

Helpful hints

1. Locate and read the operating agreement and the certificate of formation first. Even a short clause or amendment can change default rules.
2. Check whether the LLC is manager-managed or member-managed; that affects whether heirs could step into control roles.
3. Ask whether the LLC maintains buy-sell, redemption, or life-insurance-funded buyout provisions. These solve many transfer-on-death issues.
4. If you are an executor or heir, notify the LLC in writing, provide proof of your authority (letters testamentary), and request accounting and distribution information.
5. Consider amending the operating agreement now to add clear death and transfer rules: admission procedures, valuation methods, buyout formulas, and funding sources.
6. Use estate planning tools (wills, trusts, beneficiary designations, or transfer-on-death arrangements) to control who receives economic interest and to plan for buyouts.
7. Get a valuation from an independent professional if parties disagree about price for a buyout.
8. Contact a Delaware attorney with experience in LLC and probate law to avoid costly disputes and to ensure compliance with the LLC Act and probate procedures.