Montana: How an LLC Member’s Ownership Is Treated After Death — What to Know

Short answer: If your Montana limited liability company (LLC) operating agreement is silent about what happens to a member’s ownership when that member dies, Montana default LLC rules and general estate law will control. In practice, the decedent’s estate or heirs usually inherit the economic rights (right to distributions) but do not automatically receive management or voting rights unless the other members consent or the LLC law or governing documents say otherwise. This can lead to buyout procedures, a requirement to admit a new member, or other estate and probate steps.

Disclaimer: I am not a lawyer. This is general information, not legal advice. For binding advice about a specific situation, consult a Montana attorney experienced with LLCs and estates.

How membership interests are treated when a member dies (plain terms)

• Membership interests usually split into two types of rights: economic rights (the right to receive distributions or share in profits/losses) and governance rights (the right to vote, manage, and hold a membership seat).
• If the operating agreement does not say what happens on death, the deceased member’s economic rights typically pass to the person(s) who inherit the member’s property under a will or intestacy laws (through probate or by operation of a trust). That heir or estate becomes an assignee of economic rights.
• Being an assignee of economic rights normally does not automatically make that person a member with governance rights. Other members frequently must approve admitting the heir as a full member before the heir can vote or participate in management.
• The LLC or the surviving members may have the right to buy out the deceased member’s interest under default rules or common buyout practices. Without a buy-sell clause in the operating agreement, the buyout price and timing may be disputed and may require valuation or litigation.

What Montana law says (where to look)

Montana’s LLC rules are part of the Montana Code that governs business entities. If a company’s operating agreement is silent, those statutory defaults and general probate law fill in the gaps. For the statutory text, consult Montana Code Annotated, Title 35 (Corporations and Associations): https://leg.mt.gov/bills/mca/title_35/. For practical business filing and LLC guidance, see the Montana Secretary of State’s LLC pages: https://sosmt.gov/business/.

Common consequences and practical outcomes

• Probate involvement. If the deceased member owned the interest personally (not in a trust), the interest generally passes through probate. The personal representative then controls distribution of economic rights to heirs or beneficiaries.
• Limited management rights for heirs. Heirs or the estate typically receive distributions but cannot act as members (e.g., vote, manage) unless the LLC admits them.
• Possible buyout. Surviving members often have the right or practical option to buy the deceased member’s economic interest, which may avoid admitting new members and prevent management disputes.
• Valuation and timing disputes. Without an agreed valuation method, parties may disagree on price, requiring negotiation, appraisal, or court resolution.
• Tax and estate planning consequences. The transfer may have estate-tax or basis-shift implications. A buyout generates cash needs for the LLC or surviving members.

What you can do now (recommended steps)

1. Locate the operating agreement, articles of organization, and any amendments. Even a short clause may control admission or buyout rules.
2. Check for a buy-sell or transfer restriction clause. If none exists, expect Montana’s default rules and probate law to apply.
3. Talk with the other members about an immediate plan: whether the LLC will buy the interest, admit the heir, or continue with the heir as an economic-only holder.
4. Work with an estate attorney to make sure the member’s will or trust properly disposes of the LLC interest going forward (for new planning). Consider transferring interests into a trust or adding a buy-sell agreement funded by insurance.
5. Get an attorney experienced in Montana business law to interpret relevant statutes and, if necessary, handle valuation, negotiation, or admission procedures.

Example scenarios (hypothetical)

Scenario A — No operating agreement clause: Alice dies owning 30% of an LLC. Under Montana default rules, Alice’s estate receives the right to future distributions but cannot vote on major company actions unless the other members approve admitting the estate representative as a member. If the members prefer not to admit the estate, they may negotiate a buyout of Alice’s economic interest.

Scenario B — Family heir wants to run the business: Bob’s will leaves his 40% LLC interest to his daughter. Because the operating agreement is silent, the other members must typically consent before admitting the daughter as a member with management rights. If the membership does not consent, the daughter keeps economic rights only unless members later vote to admit her.

When you should get professional help

• If there is ambiguity about whether heirs automatically become members.
• If surviving members want to buy out the estate but cannot agree on price or method.
• If estate tax or income tax consequences appear significant.
• If the LLC risks deadlock or dissolution because the operating agreement is silent.

Helpful Hints

• Update estate documents: Put membership interests into a trust or include clear instructions in a will to reduce probate-related delays.
• Add a buy-sell clause: Create a valuation method and funding mechanism (e.g., life insurance) to finance a smooth buyout.
• Include admission rules: Specify whether heirs get management rights automatically or require member consent.
• Record procedures: Add a clear notice process and required documentation for transfer upon death (e.g., death certificate, letters testamentary).
• Keep communication open: Discuss end-of-life scenarios with co‑members so everyone understands expectations and liquidity plans.
• Consult early: A Montana business or probate attorney can draft clauses consistent with Montana law and help avoid costly disputes later.