Understanding How a Will Interacts with an LLC Operating Agreement in New Mexico

Quick answer: In New Mexico, a properly executed will can transfer your economic interest in an LLC to a beneficiary, but it generally cannot force the LLC to admit that beneficiary as a member or override valid transfer restrictions in the operating agreement. Whether your son ends up with the same rights you held (management, voting, distributions) depends on the LLC’s operating agreement, the New Mexico Limited Liability Company Act, and any buy‑sell or consent rules the members adopted.

Detailed Answer

This section explains how LLC ownership interests are treated under New Mexico law and what happens when a member attempts to transfer an interest by will.

1. Types of interests in an LLC

An ownership interest in an LLC normally has two components:

Transferable (economic) interest: the right to receive distributions, allocations of profit and loss, and value on liquidation.
Membership (governance) interest: management and voting rights, and the right to participate in company decisions.

New Mexico’s LLC law and common operating agreements typically treat the transferable interest as property that can be assigned or passed by will, but the transferee does not automatically become a member unless the operating agreement or the other members agree. See the New Mexico Limited Liability Company Act (NMSA Chapter 53, Article 19) for the statutory framework: https://www.nmlegis.gov/Laws/Statutes

2. What a will can actually do

If your will leaves your LLC interest to your son, he will generally inherit your economic interest — the right to receive future distributions and any buyout value — unless the operating agreement or statute says otherwise.
However, many operating agreements include clauses that limit transfers: requiring prior consent of the members, giving other members a right of first refusal, or mandating that transferable interests be redeemed by the company on the member’s death. Those contractual provisions usually control and are enforceable against the decedent’s estate and beneficiaries.
If the operating agreement requires admission of a new member by unanimous (or majority) consent, your son may not become a member automatically. He may have only the economic rights until the members approve his admission.

3. Typical clauses that override a testamentary gift

Common operating agreement provisions that can limit or effectively nullify a bequest by will include:

Transfer restriction clauses (no transfer without consent).
Buy‑sell or redemption provisions that trigger a forced buyout on death.
Approval/admission provisions that require members to vote before a transferee becomes a member.

4. Example (hypothetical fact pattern)

Suppose you own 100% of an LLC. The operating agreement states that on a member’s death the company must buy the deceased member’s transferable interest at fair market value and prohibits transfer without written consent of the remaining members. Your will leaves your interest to your son. Under those rules, your son would likely receive the purchase proceeds (an economic interest) from the company, but he would not automatically become the LLC’s manager or voting member unless the members consented to admit him.

5. Statutory backdrop in New Mexico

New Mexico statutes provide the general rules governing LLCs and transfers of membership interests. The statutory scheme makes a distinction between transferable economic interests and membership/management rights and allows operating agreements to define or limit transfers and admission of successors. For the statutory language and any details relevant to your situation, consult the New Mexico statutes (see the New Mexico statutes index at https://www.nmlegis.gov/Laws/Statutes and search for the Limited Liability Company Act, NMSA Chapter 53, Article 19) and the probate/will provisions in Chapter 45.

Practical steps to take now

Locate and read the operating agreement carefully. Look for transfer restrictions, buy‑sell, redemption, and admission clauses.
Determine what exactly your will transfers: is it the entire member interest, only economic rights, or something else? Ask an attorney or probate professional to review your will language.
If you want your son to hold membership rights (management, voting), consider amending the operating agreement now to allow admission on death, or execute a signed written transfer and obtain any required consents while you can.
Consider a buy‑sell agreement funded by life insurance if you prefer the company or other members to buy the interest at death at a known price.
Work with an estate and business attorney to coordinate LLC documents, beneficiary designations, and your will so estate transfer plans achieve your goals and reduce family disputes and probate delay.

Helpful Hints

Review the operating agreement first — it often controls succession more than a will does.
If the LLC is closely held (family business), use a written succession plan and funded buy‑sell to avoid forced sales or fragmentation.
Keep clear records: if members must consent to admission, obtain those consents and keep them with the company records.
Consider alternative mechanisms (gifting during life, member admission now, trusts that hold the transferable interest) to make transition smoother.
Notify the company and update the membership ledger or certificate after any transfer or probate distribution so the LLC books accurately reflect ownership.
Tax and creditor consequences can differ for economic vs. membership transfers. Discuss tax planning with a tax advisor or attorney.

Next best step: Consult a New Mexico attorney who handles both estate planning and business/LLC matters. They can read your operating agreement, review your will, and draft a coordinated plan to ensure your intended outcome.

Disclaimer: This article explains general principles under New Mexico law and is for educational purposes only. It does not constitute legal advice. For advice specific to your situation, consult a licensed attorney in New Mexico.