Detailed Answer — How Idaho law treats an LLC interest when a member dies

When an LLC’s operating agreement does not address death of a member, Idaho’s LLC statutes provide default rules that govern what happens. Generally, two different kinds of rights are involved in an LLC interest:

• Economic rights — the right to share in profits and receive distributions; and
• Management / membership rights — the right to vote, manage, and be treated as a member for decision-making and fiduciary purposes.

Under the default rules adopted in Idaho’s Limited Liability Company Act, when a member dies:

1. That member is typically dissociated from the LLC by reason of death. Dissociation ends the deceased person’s active status as a member for management purposes.
2. The deceased member’s transferable (economic) interest usually passes to their estate or beneficiaries under probate law (or under a trust or beneficiary designation, if one exists). The estate or beneficiary commonly acquires only the right to receive distributions and allocations of profits and losses — not the automatic right to step into the deceased member’s management or voting position.
3. An assignee (the estate or beneficiary) will generally hold only an assignment of the economic interest unless the remaining members consent to admit the assignee as a full member. Without consent, the assignee cannot exercise management rights such as voting, being a manager, or taking part in member-only decisions.
4. The LLC and the remaining members often have a statutory or contractual option to buy out the deceased member’s economic interest at a fair value. If the operating agreement is silent, Idaho default rules and equitable principles govern how that buyout is handled — including timing and valuation procedures.

These default rules are designed so that the LLC can continue operating without automatically admitting an outsider (the decedent’s heir) into the membership. For authoritative text, see Idaho’s Limited Liability Company Act (Idaho Code, Title 30 — Limited Liability Companies). You can review the statutory chapter here: Idaho Code — Title 30, Chapter 21 (Limited Liability Companies).

Practical examples (hypotheticals)

Example A — No operating agreement provisions and no member consent: Jane dies owning 30% of the LLC. Her estate receives the economic interest (right to distributions). The estate cannot vote or manage the LLC unless the surviving members agree to admit the estate as a member. The LLC or other members may have the right to redeem or buy Jane’s economic interest.

Example B — Members want continuity: If the remaining members prefer continuity, they can agree (or their operating agreement can allow) to admit the deceased’s heir as a member or enact a buy-sell redemption to transfer the interest to the LLC or other members for a cash payment.

Where disputes often arise

• Whether the estate is entitled to management rights or only economic distributions.
• Valuation of the deceased member’s interest for buyout or redemption.
• Timing and source of funds for any buyout (does the LLC have cash? Is life insurance used?).

What to do next — recommended steps for LLC members and for an estate

1. Read your operating agreement carefully. If it is silent, understand that Idaho’s statutory defaults will apply.
2. Check the decedent’s estate documents (will, trust, beneficiary designations) to see who inherits economic rights. Probate procedures will control transfer of the decedent’s property to heirs or beneficiaries.
3. Confirm whether the remaining members want the heir admitted as a member, or whether the LLC will buy out the interest. If buyout is chosen, agree on valuation method and payment terms.
4. Consider whether the LLC should have or already has life insurance, a buy-sell fund, or a written buy-sell agreement to pay for a purchase without disrupting operations.
5. Document any decision in writing (amend operating agreement, execute membership transfer documents, or sign a buyout agreement).
6. When valuation or rights are disputed, consider hiring a business valuation professional and consult an Idaho attorney experienced in LLCs and estates to protect your position and to comply with Idaho law.

Helpful Hints

• Don’t assume heirs automatically become members — in many cases they get only economic rights unless members admit them.
• To avoid uncertainty, add clear death and buyout provisions to your operating agreement: define valuation method, payment schedule, and admission procedures.
• Use life insurance owned by the LLC or cross-owned by members to fund buyouts smoothly.
• If you inherit an economic interest, get a copy of the LLC’s operating agreement and membership ledger; don’t sign admission paperwork without legal review.
• Probate can affect timing: distributions to heirs may be delayed until probate or trust administration is complete.
• Record changes with the LLC (membership records) and make sure tax reporting is handled correctly for distributions and transfers.