Understanding What Happens to an LLC Member’s Interest After Death (Maryland)

Short answer: If an LLC operating agreement in Maryland does not say what happens when a member dies, Maryland’s default LLC rules apply. The deceased member’s membership interest generally becomes part of the member’s estate as personal property. The estate or heirs usually receive the economic rights (distributions) but do not automatically receive management or voting rights unless other members consent or the operating agreement (or members) allow admission of the heir as a member. The LLC typically continues to operate rather than automatically dissolving. This is a general explanation—not legal advice.

Detailed answer — Maryland default rules and practical effect

Maryland follows the Revised Uniform Limited Liability Company Act (RULLCA) framework for LLCs through state statute. Where an operating agreement is silent, the statutory default rules govern membership interests, transfers, dissociation, and member rights. See Md. Code, Corporations & Associations, Title 4A for the law that applies to many LLC matters in Maryland (search the Maryland Code for Title 4A at the Maryland General Assembly site: https://mgaleg.maryland.gov/).

1. The membership interest is treated as personal property

Under Maryland default rules, a member’s ownership in an LLC consists of two basic parts: (a) economic rights (the right to distributions of profits) and (b) membership (management and voting) rights. On death, the deceased member’s interest is treated as part of the member’s estate—personal property that passes under the member’s will or by intestacy rules if there is no will. The estate or beneficiaries inherit whatever transferable portion of the interest exists under law and the operating agreement.

2. Transferees usually get economic rights, not management rights

Because most operating agreements reserve admission of new members to the consent of the remaining members, the person who inherits (or receives by assignment) the membership interest normally receives the right to distributions (an economic interest) but not the right to participate in management or to exercise voting rights as a member. That person is often called a “transferee” or “assignee.” To become a member with management authority the transferee usually needs the other members’ approval or the LLC must follow any specific admission rules in the operating agreement.

3. Death does not necessarily dissolve the LLC

In most multi-member LLCs, the death of a member does not automatically cause the LLC to dissolve. The LLC typically continues with the remaining members unless the operating agreement provides otherwise or the remaining members take action to dissolve. A different rule may apply for single-member LLCs or LLCs with specific dissolution triggers in their agreements.

4. Probate and administration

The deceased member’s membership interest is part of the probate estate (unless it passes outside probate). The executor or personal representative handles the transfer of the decedent’s economic interest according to the will or intestacy rules. If the interest must be sold or managed during administration, the personal representative acts on behalf of the estate subject to LLC rules and member approval requirements.

5. Creditor claims — charging orders and remedies

If the decedent had creditors, a creditor may pursue remedies against the decedent’s transferable economic interest. Under RULLCA-style rules, creditors often obtain a charging order against distributions payable to the debtor’s (now-deceased member’s) interest rather than seizing management rights. That means creditors can receive distributions that would otherwise go to the estate but usually cannot step into management. Specific Maryland statutes and court decisions govern these remedies; check Title 4A for the rules that apply in Maryland (see the Maryland General Assembly site: https://mgaleg.maryland.gov/).

6. Practical consequences for the LLC and surviving owners

• Heirs may be entitled only to financial distributions until admitted as members.
• Remaining members may have the option (or obligation under an agreement) to buy the deceased member’s interest — a buy‑sell provision is common for this purpose.
• If no buy‑sell agreement exists, the estate or heir can retain the economic interest and receive distributions, which can cause friction if the transferee is not involved in management.
• Unclear or absent provisions can trigger probate delays, valuation disputes, or litigation among heirs and members.

Common hypothetical to illustrate

Imagine a three‑member Maryland LLC with members A, B, and C, and an operating agreement that says nothing about death. Member A dies and leaves an interest to A’s spouse. Under Maryland defaults, A’s spouse receives A’s economic rights (the right to distributions) through A’s estate but does not automatically gain voting or management authority. If B and C want the spouse as a full member, they must admit the spouse under the LLC’s rules (or the members can agree to buy the spouse out). If the spouse is not admitted, the spouse receives distributions but cannot run the business.

What you should do now (practical steps)

1. Locate and read the LLC’s operating agreement carefully. Even if you think it’s silent, some agreements include clauses about transfer on death, buy‑outs, or admission of heirs.
2. Identify whether the LLC is governed by Maryland’s Title 4A rules and whether the company has any buy‑sell, admission, or transfer provisions that apply on death. The Maryland General Assembly website lists the relevant statute text: https://mgaleg.maryland.gov/.
3. If you are an heir or executor: notify the LLC’s managers or members promptly; obtain a copy of the operating agreement and any membership ledger; determine whether probate administration is needed to transfer the economic interest.
4. If you are a surviving member: consider whether you want the heir admitted, whether you prefer a buy‑out, and whether the LLC needs an amendment to address future deaths.
5. Get a valuation if a buy‑out is being considered. Valuation methods vary and disputes are common without a clear agreement.
6. Consider amending the operating agreement to add clear buy‑sell, admission, or transfer‑on‑death provisions to avoid repeated problems.

When to consult an attorney

Talk to an attorney experienced with Maryland LLC and probate law if any of the following apply:

• The operating agreement is ambiguous or silent about death and there are multiple heirs or competing claims.
• Creditors assert claims against the decedent’s LLC interest.
• Members disagree about admission, buy‑out price, or whether the LLC should dissolve.
• Probate or estate administration issues arise involving the LLC interest.

Important statutory reference: Maryland’s LLC provisions are codified in the Maryland Code, Corporations & Associations, Title 4A (Limited Liability Companies). Consult the Maryland General Assembly website for the current statutory text: https://mgaleg.maryland.gov/.

Helpful Hints

• Do not assume heirs get management control. Most states (including Maryland under default rules) separate economic rights from management rights.
• Create a buy‑sell or transfer‑on‑death provision in your operating agreement to avoid probate and disputes.
• Consider funding buy‑outs with life insurance for smooth transitions.
• Keep an up‑to‑date membership ledger and provide copies of the operating agreement to members and their advisors.
• Label and store estate planning documents where heirs and the executor can find them quickly.
• If you worry about creditor risk on death, ask counsel about charging orders and creditor remedies under Maryland law.

Disclaimer: This article explains general rules and common outcomes under Maryland law. It is educational only and not legal advice. For advice tailored to your situation, consult a Maryland attorney who handles LLC law and estate matters.