Maryland — Can a Will Override an LLC Operating Agreement to Give Your Business Interest to Your Son? | Maryland Estate Planning | FastCounsel
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Maryland — Can a Will Override an LLC Operating Agreement to Give Your Business Interest to Your Son?

Can a will give your LLC interest to your son if the operating agreement says otherwise?

Short answer: Generally no — under Maryland law the operating agreement controls how membership interests are transferred and who becomes a member. A last will can transfer the economic or “transferable” portion of your LLC interest to your son, but it usually cannot override contract provisions in the operating agreement that limit transfers, require consent, or trigger buy‑outs on death. For more on the Maryland LLC rules, see the Maryland Limited Liability Company Act (Title 4A).

Detailed answer — how this works under Maryland law

Start with two separate legal concepts that matter:

  • Membership (governance) rights: these are the rights to participate in management, vote, and have duties and liabilities as a member of the LLC.
  • Transferable (economic) interests: these are the rights to distributions of money or other financial benefits from the LLC.

Maryland’s Limited Liability Company Act (Title 4A of the Maryland Code) sets default rules, but the operating agreement may change many of them. The usual rule across modern LLC statutes (and under Maryland law as implemented in Title 4A) is:

  • A member can generally transfer his or her transferable (economic) interest by will or by operation of law, so the estate or a named beneficiary can receive the right to distributions;
  • However, a transferee who receives only an assigned transferable interest typically does not become a full member with management or voting rights unless the operating agreement (or the other members) admits that person as a member (often by unanimous or majority consent, depending on the agreement).

In practical terms, that means:

  • If the operating agreement contains restrictions on transfer (for example, buy‑sell provisions, rights of first refusal, or an absolute prohibition on transfers without consent), those contract provisions will usually control. A will cannot force the LLC or other members to accept your son as a member if the operating agreement says transfers are restricted.
  • If the operating agreement provides that, on a member’s death, the member’s interest is purchased by the LLC or by the remaining members (a typical buy‑sell or redemption clause), the will cannot override that contract. The estate may receive a buy‑out price rather than control or membership in the company.
  • If the operating agreement is silent or permits admission of transferees on consent, the will can transfer the economic interest to your son, but he will become a full member only if the other required consents are obtained or the agreement allows automatic admission.

For the Maryland statutory framework, see the Maryland Code, Corporations and Associations — Title 4A (Maryland Limited Liability Company Act): Md. Code, Corps. & Ass’ns, Title 4A. That Title contains the default rules about membership, assignment of interests, and how agreements between members govern those matters.

Common clauses that determine what happens on death

  • Buy‑sell / redemption clause: often requires the LLC or the remaining members to buy the deceased member’s interest at a fixed formula or appraised value.
  • Right of first refusal: requires the estate or beneficiary to offer the interest to the LLC or other members before selling or transferring it to an outsider.
  • Admission requirement: states that transferees may not be admitted as members without the consent of a specified percentage of members.

Hypothetical example

Suppose Alex owns 40% of ABC, LLC. His operating agreement says that on a member’s death the company must purchase the decedent’s interest at fair market value and that no transferee can become a member without unanimous consent. Alex’s will leaves “all my business interests” to his son.

Result under Maryland law and the operating agreement:

  • Alex’s will would transfer the economic portion of his interest (the right to receive any distributions or the buy‑out payment) to his son as a beneficiary or as part of the estate.
  • Because the operating agreement requires a company purchase on death, the LLC or remaining members would typically redeem Alex’s interest and pay the estate (or the person receiving the economic interest) the buy‑out amount. The son would receive the money (or the estate would receive it), not necessarily membership or managerial rights.
  • If the operating agreement instead allowed automatic admission of transferees, the son might step into full membership rights per the agreement. But the will alone cannot override a contrary operat ing agreement clause without the required approvals.

Practical steps to take now

  1. Locate and read the operating agreement carefully. Look for transfer restrictions, buy‑sell clauses, and admission rules. Those provisions usually control.
  2. Check whether your LLC interest is structured as an assignable “transferable interest” (economic only) or as membership that can be transferred. The agreement may define these terms.
  3. If you want your son to become a member (not just receive distributions), talk to the other members and consider amending the operating agreement now to allow that transfer or to include a planned buy‑in mechanism.
  4. Coordinate your estate plan with the company plan. Typical estate tools include buy‑sell agreements funded by life insurance, cross‑purchase arrangements, or explicit operating agreement provisions that govern transfers on death.
  5. When a member dies, involve the LLC’s counsel and the executor of the estate early so corporate procedures (consents, valuations, payments) are followed correctly.

When to talk to a lawyer

See an attorney if any of the following apply:

  • The operating agreement has transfer restrictions, and you want to change them;
  • You want to ensure your will and business documents work together to provide your son with the intended result;
  • There is a dispute among members about the meaning of a clause, valuation, or whether a transferee should be admitted as a member;
  • You want to put a funded buy‑sell plan (for example, life insurance) in place to provide liquidity at death.

Helpful Hints

  • Do not assume a will automatically transfers managerial control of an LLC — check the operating agreement first.
  • Operating agreements are contracts among members and often prevail over estate documents for how interests are handled.
  • If you want your heir to run the business, amend the operating agreement now to allow admission or to create a clear buy‑in path.
  • Use life insurance or a funded buy‑sell to avoid forcing heirs to negotiate with other members for payment.
  • Keep estate planning and business documents together — inconsistencies cause delays and litigation after death.
  • When in doubt, obtain a written agreement from the other members about what will happen at your death; oral promises are risky.

Useful Maryland reference: Maryland Limited Liability Company Act (Title 4A of the Maryland Code): https://mgaleg.maryland.gov/mgawebsite/Laws/StatuteText?article=corps&section=4A-101 (start of Title 4A).

Disclaimer: This article explains general Maryland law and common practice. It is for informational purposes only and is not legal advice. The rules that apply to a specific LLC and estate can vary based on the operating agreement language, the company’s structure, and other facts. Consult a Maryland attorney experienced in business and estate planning to review your documents and help implement the plan you want.

The information on this site is for general informational purposes only, may be outdated, and is not legal advice; do not rely on it without consulting your own attorney.