A properly drafted LLC may very likely avoid Florida probate. Many individuals use the limited liability company (“LLC’) to own rental property in Florida for asset protection and to limit personal liability. It is the favored entity for closely-held businesses and family investments. Many families see the LLC as a substitute to the irrevocable trust or a way to “control” the younger generations through limited access and less opportunities.
How LLC Avoids Probate
Usually, the LLC members want to control the identity of the inheriting member without adversely impacting the LLC. Of course, the members can always make an agreement to make a will pursuant to Florida Statute section 732.701 (2001). It seems easier, however, to name the inheriting member in the LLC operating agreement. But, in doing so, be cautious.
For instance, if the language of your operating agreement conflicts with the language of the Will or Revocable Living Trust, Florida statutory law is silent as to the ramifications. Which one overrides? To avoid this conflict, it is imperative that the provisions align. Keep in mind, you are combining two areas—contract law and the laws governing Wills/Trusts/Intestacy (having no Will or Trust). Taking extra time to ensure the lack of conflicts is time worth spent.
No Clear Direction in Florida for an LLC
While we do not have Florida case law on the topic, other courts in New Jersey and Ohio have found that the contractual provisions in either Operating Agreements or Buy-Sell Agreements would trump the testamentary language in wills and trusts. In light of this and because it is not crystal clear Florida law, much care must be taken into drafting the operating agreement and several pertinent provisions. Further, the members may also choose to assign the interests of the LLC to a Revocable Living Trust as means of probate avoidance. Again, it is not clear if it will work and if there are multiple members, these members may not approve of such a measure.
An LLC Operating Agreement May Help Avoid Florida Probate
In short, using an Operating Agreement to pass property onto another after death may be good option keeping in mind that Florida law is not entirely clear on the subject. But if you choose this option, the Operating Agreement should be drafted with care by an attorney that is knowledgeable about the necessary additions needed to a standard Operating Agreement. Contact us to learn more.
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Lori Vella is an Estate Planning and Business Attorney. She works virtually throughout Florida and New York, but has her home office in Tampa, Florida. She is mom to a little boy which ignited the passion for helping other families. She and her son enjoy car rides, playgrounds and taking mini-adventures. They also have an organic garden that surprisingly yields vegetables. Lori considers herself well-versed in Seinfeld and welcomes any trivia!
Disclaimer: The Law Office of Lori Vella’s website contains general information directed to Florida residents. This firm does not intend to give legal advice through its pages and/or blog. If you need legal advice, we encourage you to find an attorney licensed in your state. This language on this website does not create an attorney-client relationship between you and this firm.