Detailed Answer
If an LLC operating agreement is silent about what happens to a member’s ownership when the member dies, Kansas default law and general estate rules will fill the gap. The practical result usually looks like this:
1. Transferable (economic) interest passes to the estate
Under Kansas LLC law, a deceased member’s transferable interest — meaning the right to receive distributions of money and other economic benefits — will pass to the member’s estate and ultimately to the person(s) named in the member’s will or to heirs under intestacy rules. The estate or the heir who receives the transferable interest generally has the right to receive distributions but not to step into the deceased member’s management, voting, or other member-specific rights unless the LLC agreement or the remaining members agree otherwise. For the Kansas LLC statutes on default rules and member rights, see the Kansas Revised Limited Liability Company Act (K.S.A. 17-76,101 et seq.): https://www.ksrevisor.org/statutes/chapters/ch17/017_076/.
2. Management rights usually end at death
When a member dies, that person can no longer participate in the LLC’s management. Their death commonly results in “dissociation” from the LLC under modern LLC law frameworks. Dissociation means that the deceased member no longer exercises voting or managerial authority; instead, the LLC continues with the remaining members unless the operating agreement provides for a different outcome.
3. The estate may be entitled to a buyout
Many state LLC laws (and many operating agreements) provide that, after dissociation, the LLC or the remaining members must buy the deceased member’s transferable interest at a fair value. If the operating agreement is silent, Kansas default provisions and equitable principles typically determine how the value is calculated and the timing of any payment. If the parties cannot agree, a court or a neutral valuation expert may be needed to determine fair value.
4. LLC survival vs. dissolution
The LLC usually continues to operate after a member’s death. Death alone does not necessarily dissolve the LLC unless the operating agreement provides for dissolution on a member’s death or the remaining members choose to dissolve. Absent agreement terms to the contrary, the surviving members can continue the business while the estate or heirs hold only the deceased’s economic interest.
5. Probate and estate planning issues
The transfer of the economic interest follows estate law. If the deceased member left a valid will or trust that disposes of personal property (including transferable business interests), the estate plan controls. If there is no will, Kansas intestacy rules govern who inherits the transferable interest. Executors or personal representatives must follow probate procedures to collect distributions payable to the estate and to transfer the economic interest to beneficiaries.
Practical example (hypothetical)
Suppose Jane is a 40% member of a Kansas LLC with no operating agreement provision about death. Jane dies with a will that leaves her assets to her brother. Jane’s brother (as beneficiary of Jane’s estate) will receive the economic distributions Jane would have received. He will not automatically become a voting member or manage the LLC unless the other members agree or the operating agreement allows transfer of membership rights on death. If the LLC or the other members want full control of Jane’s 40% interest, they may negotiate a buyout of the estate at fair value.
Where to find the law
The governing statutes are in the Kansas Revised Limited Liability Company Act (K.S.A. 17-76,101 et seq.). The act sets default rules that apply when an operating agreement is silent. Read the act here: https://www.ksrevisor.org/statutes/chapters/ch17/017_076/.
Disclaimer: This article provides general information about Kansas law and is not legal advice. For advice about your situation, consult a licensed Kansas attorney who handles LLC, probate, and estate matters.
Helpful Hints
- Check your operating agreement first. If it addresses death, follow that language. Clear provisions avoid uncertainty.
- Review estate documents (will, trust, beneficiary designations). Those documents determine who receives the deceased member’s economic interest.
- Notify the LLC promptly after a member dies. Provide the personal representative’s contact information and a death certificate if requested.
- Expect management rights to end at death. Heirs typically receive only economic rights unless the operating agreement or the members agree otherwise.
- Look for a buy-sell mechanism. If the LLC lacks one, the estate may negotiate a buyout or seek payment under Kansas default rules.
- Get a valuation. If a buyout is required or negotiated, hire a qualified business appraiser to determine fair value.
- Consult two attorneys: one in probate/estate law (to handle estate administration) and one in business/LLC law (to address membership and buyout issues).
- Consider preventive steps: add clear death and transfer provisions to the operating agreement, and consider life insurance or a buy-sell agreement funded to ease buyouts.
- Keep records updated. Make sure membership records, capital accounts, and contact information are accurate—this speeds administration after death.
- If no agreement and a dispute arises, consider mediation before litigation to save time and costs.