{"id":12496,"date":"2020-11-26T09:54:40","date_gmt":"2020-11-26T16:54:40","guid":{"rendered":"https:\/\/www.keytlaw.com\/azllclaw\/?p=12496"},"modified":"2023-11-01T10:18:05","modified_gmt":"2023-11-01T17:18:05","slug":"member-dies","status":"publish","type":"post","link":"https:\/\/www.keytlaw.com\/azllclaw\/2020\/11\/member-dies\/","title":{"rendered":"3 Ways Your Loved One Will Be Harmed If You Own an LLC & Do Not Prepare for Death"},"content":{"rendered":"

If a member of an Arizona LLC dies and the member did not take action to protect the member’s loved one(s) bad things will happen.\u00a0 The failure to plan for death creates the following problems:<\/p>\n

1. The membership interest of the deceased member may not be inherited by the person or people the deceased member would want to inherit the membership interest.<\/p>\n

2. A person who inherits the membership interest of a deceased member of a multi-member LLC will not be a member of the LLC.\u00a0 Instead, the heir will acquire only an economic interest in the LLC, which means the heir(s) will not be able to vote on any issue or receive records that all members have a right to receive.<\/p>\n

3. The person who inherits the LLC interest may have to do an expensive and time consuming court probate to change ownership of the LLC.<\/p>\n

Click on the blue text below or the + icon to open the text box to see the explanation of each problem.<\/strong><\/p>\n<\/div>

<\/i><\/i><\/span>Problem 1: The Person Who Inherits Your LLC After Your Death May Not be the Person You Want to Inherit It<\/span><\/a><\/h4><\/div>
\n

If you do not have a will or a trust that states who inherits your interest in the LLC if you die the LLC will go to the person or people selected by the intestate succession law of your state of residence.\u00a0 Your state\u2019s plan for who inherits may be different from who you want to inherit the LLC.<\/p>\n

If you are an Arizona resident see \u201cWho Inherits Property of an Arizona Resident Who Dies without a Will or a Trust?<\/strong><\/em><\/a>\u201c<\/p>\n

Example 1<\/strong>: Bob Jones owns his LLC as his separate property.\u00a0 He is married to Linda and has two children from a prior marriage.\u00a0 Bob wants Linda to inherit all of his valuable LLC.\u00a0 Bob dies without a Will or trust that designates who inherits the LLC.\u00a0 The law of intestate succession of Bob\u2019s state of residence gives one half of the LLC to Linda and the other half to Bob\u2019s children equally<\/strong>.<\/p>\n

Solution<\/strong>:\u00a0 Bob should have signed a will or a trust that named Linda as the sole heir of Bob\u2019s interest in the LLC.<\/p>\n

Example 2<\/strong>: Bob Jones invests $90,000 in J&F LLC and owns a 90% membership interest.\u00a0 Linda is Bob\u2019s significant other of 20 years. Ned Flanders invests $10,000 and owns 10%.\u00a0 Bob dies without a Will or a trust.\u00a0 Instead of the 90% interest in the LLC going to Linda the law of intestate succession of Bob\u2019s state of residence gives the LLC interest to Bob\u2019s son whom Bob hasn\u2019t heard from in 25 years.\u00a0 Linda gets none of the LLC.<\/p>\n

Solution<\/strong>: Bob should have signed a will or a trust that named Linda as the sole heir of Bob\u2019s interest in the LLC.<\/p>\n

Example 3<\/strong>: Bob Jones is single and has three kids.\u00a0 Bob wants his entire interest in his LLC to go to his daughter Maggie who works in the business with Bob. Bob dies without a Will or trust.\u00a0 The law of intestate succession of Bob\u2019s state of residence gives the LLC interest equally to Bob\u2019s three kids.\u00a0 Maggie gets one third of the LLC instead of all of it.<\/p>\n

Solution<\/strong>: Bob should have signed a will or a trust that named Maggie as the sole heir of Bob\u2019s interest in the LLC.<\/p>\n

Example 4<\/strong>: Bob Jones is single.\u00a0 He wants his brother James to inherit his LLC.\u00a0 Bob dies without a Will or a trust.\u00a0 The law of intestate succession of Bob\u2019s state of residence gives the LLC interest to Bob\u2019s parents.\u00a0 James gets nothing.<\/p>\n

Solution<\/strong>: Bob should have signed a will or a trust that named Linda as the sole heir of Bob\u2019s interest in the LLC.<\/p>\n<\/div><\/div><\/div>

<\/i><\/i><\/span>Problem 2: Your Heir Will Not be a Voting Member of the LLC<\/span><\/a><\/h4><\/div>
\n

Arizona Revised Statutes Section 29-3502<\/a> states:<\/p>\n

\n

A. A transfer, in whole or in part, of a transferable interest does not entitle the transferee to either of the following:<\/p>\n

(a) participate in the management or conduct of the company\u2019s activities and affairs.<\/p>\n

(b) . . . have access to records or other information concerning the company\u2019s activities and affairs.<\/p>\n

B. A transferee has the right to receive, in accordance with the transfer, distributions to which the transferor would otherwise be entitled.<\/p>\n<\/blockquote>\n

This statute prevents an heir from voting on LLC matters and getting information about the LLC.<\/p>\n

Example 5<\/strong>: Same facts as Example 2 above, but the good news is that Bob\u2019s Will left Bob\u2019s 90% interest in the LLC to Linda.\u00a0 Because of Section 29-3502 Linda does not have any voting rights and can\u2019t get any information about the LLC.\u00a0 Linda inherited only an economic interest in the LLC, not a membership interest.\u00a0 This means that Ned Flanders who owns 10% of the LLC is the only voting member and now has total control of the LLC<\/strong> that Linda has a right to receive 90% of the and distributions.<\/p>\n

Solution<\/strong>:\u00a0 The Operating Agreement of the LLC signed by Bob and Ned should have had a clause that stated that Bob\u2019s heir Linda would automatically become a member of the LLC entitled to all rights of membership on Bob\u2019s death.\u00a0 Our Operating Agreements contain this language.<\/p>\n

<\/h2>\n<\/div><\/div><\/div>

<\/i><\/i><\/span>Problem 3: Your Heir May be Forced to Do an Expensive & Time-Consuming Probate<\/span><\/a><\/h4><\/div>
\n

If you die and your LLC is not owned by your trust your heir(s) may be forced to open a probate with a court in your state of residence to transfer ownership of the LLC to your heir(s).\u00a0 We are Arizona probate lawyers.\u00a0 Our fee to do an uncontested Arizona probate is $2,500 – $3,500 and it takes five or six months.<\/p>\n

If you are an Arizona resident and the value of ALL<\/span><\/strong> of your personal property including your LLC is less than $75,000 your heir(s) can avoid probate by preparing a small estate affidavit.<\/p>\n

Example 6<\/strong>:\u00a0 Bob dies without a Will or a trust.\u00a0 The total value of his personal property exceeds $75,000.\u00a0 Bob’s wife inherited his LLC interest under Arizona’s law of intestate succession, but she has to spend $3,500 to hire an attorney to do a probate.<\/p>\n

Solution<\/strong>: If Bob had signed trust the LLC interest would have passed automatically to his wife on Bob’s death without the need for a probate.<\/p>\n<\/div><\/div><\/div><\/div><\/div><\/div><\/div><\/div><\/div>\n","protected":false},"excerpt":{"rendered":"","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"om_disable_all_campaigns":false,"footnotes":""},"categories":[8,51,48,29],"tags":[],"class_list":["post-12496","post","type-post","status-publish","format-standard","hentry","category-faqs","category-how-do-i","category-members","category-operating-agreements"],"yoast_head":"\n3 Ways Your Loved One Will Be Harmed If You Own an LLC & Do Not Prepare for Death - Arizona LLC Law %<\/title>\n<meta name=\"description\" content=\"Arizona LLC lawyer with 147 five star Google reviews explains how to prevent the wrong person from inheriting your Arizona LLC.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.keytlaw.com\/azllclaw\/2020\/11\/member-dies\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"3 Ways Your Loved One Will Be Harmed If You Own an LLC & Do Not Prepare for Death\" \/>\n<meta property=\"og:description\" content=\"Arizona LLC lawyer with 147 five star Google reviews explains how to prevent the wrong person from inheriting your Arizona LLC.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.keytlaw.com\/azllclaw\/2020\/11\/member-dies\/\" \/>\n<meta property=\"og:site_name\" content=\"Arizona LLC Law\" \/>\n<meta property=\"article:publisher\" content=\"http:\/\/www.facebook.com\/keytlaw\" \/>\n<meta property=\"article:author\" content=\"http:\/\/www.facebook.com\/keytlaw\" \/>\n<meta property=\"article:published_time\" content=\"2020-11-26T16:54:40+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2023-11-01T17:18:05+00:00\" \/>\n<meta name=\"author\" content=\"Richard Keyt\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Richard Keyt\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"6 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\\\/\\\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\\\/\\\/www.keytlaw.com\\\/azllclaw\\\/2020\\\/11\\\/member-dies\\\/#article\",\"isPartOf\":{\"@id\":\"https:\\\/\\\/www.keytlaw.com\\\/azllclaw\\\/2020\\\/11\\\/member-dies\\\/\"},\"author\":{\"name\":\"Richard Keyt\",\"@id\":\"https:\\\/\\\/www.keytlaw.com\\\/azllclaw\\\/#\\\/schema\\\/person\\\/9d6c74d30296559f95e238fa25182391\"},\"headline\":\"3 Ways Your Loved One Will Be Harmed If You Own an LLC & Do Not Prepare for Death\",\"datePublished\":\"2020-11-26T16:54:40+00:00\",\"dateModified\":\"2023-11-01T17:18:05+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\\\/\\\/www.keytlaw.com\\\/azllclaw\\\/2020\\\/11\\\/member-dies\\\/\"},\"wordCount\":1580,\"commentCount\":0,\"publisher\":{\"@id\":\"https:\\\/\\\/www.keytlaw.com\\\/azllclaw\\\/#organization\"},\"articleSection\":[\"FAQs\",\"How Do I\",\"Members\",\"Operating Agreements\"],\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"CommentAction\",\"name\":\"Comment\",\"target\":[\"https:\\\/\\\/www.keytlaw.com\\\/azllclaw\\\/2020\\\/11\\\/member-dies\\\/#respond\"]}]},{\"@type\":\"WebPage\",\"@id\":\"https:\\\/\\\/www.keytlaw.com\\\/azllclaw\\\/2020\\\/11\\\/member-dies\\\/\",\"url\":\"https:\\\/\\\/www.keytlaw.com\\\/azllclaw\\\/2020\\\/11\\\/member-dies\\\/\",\"name\":\"3 Ways Your Loved One Will Be Harmed If You Own an LLC & Do Not Prepare for Death - 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