Avoiding Probate of LLC Membership Interests in Florida

An LLC membership interest owned by an individual at death is a probate asset. Without planning, the interest passes through the decedent’s estate, and a court must supervise the transfer before heirs can take ownership. For a closely held business or a real estate holding LLC, that process can paralyze operations for months while a personal representative obtains authority to act.

Florida law provides three ways to transfer an LLC membership interest outside of probate. The owner can draft the operating agreement with succession provisions that trigger an automatic transfer at death, assign the interest to a revocable living trust, or register a transfer-on-death designation under Chapter 711.

The Blechman Decision

The Florida Fourth District Court of Appeal’s 2015 decision in Blechman v. Estate of Blechman, 160 So. 3d 152 (Fla. 4th DCA 2015), established that an LLC operating agreement can direct the transfer of a deceased member’s interest outside of probate. The court held that because operating agreements are governed by contract law, a provision specifying that a member’s interest “shall pass to and immediately vest in” designated recipients at death creates a binding non-probate transfer. The membership interest never enters the decedent’s probate estate.

The Blechman court also ruled that this contractual transfer overrides a conflicting provision in the decedent’s will or revocable trust. The decedent in that case had directed by trust amendment that his LLC interest pass in part to his girlfriend. The court found the operating agreement’s default succession provision controlled, and the trust provision was nullified as an attempted disposition of property the decedent no longer owned at death.

Before Blechman, the only reliable method for avoiding probate of an LLC interest was transferring the membership interest into a revocable living trust. An older alternative was holding the interest as joint tenants with rights of survivorship, which passed ownership to the surviving co-owner at death. That approach required adding a co-owner during life, raising both control and creditor-exposure concerns. After Blechman, the operating agreement itself is the succession instrument, and many LLC owners no longer need a trust solely for probate avoidance.

Operating Agreement Succession Provisions

An operating agreement only avoids probate under Blechman if the succession language explicitly states what happens when a member dies. The provision should identify specific recipients, state that the transfer occurs immediately upon death, and use language indicating that the interest “shall pass to and immediately vest in” the designated person or persons.

Vague or ambiguous language will not achieve probate avoidance. In Tita v. Tita, 334 So. 3d 646 (Fla. 4th DCA 2022), the same court distinguished Blechman because the operating agreement anticipated a testamentary transfer through the member’s estate rather than an immediate vesting in a named individual. An agreement that contains a buy-sell provision or death buyout option, without specifying that ownership vests automatically, does not qualify as a non-probate transfer under Blechman.

The operating agreement should also address what type of interest the recipient receives. The agreement can provide that the designated recipient becomes a full member with voting and management rights, or it can limit the recipient to assignee status with only economic rights. For multi-member LLCs, the remaining members may want the right to approve whether the recipient is admitted as a full member or remains a passive interest holder.

Does a Transfer-on-Death Designation Work for LLC Interests?

Florida’s Uniform Transfer-on-Death Security Registration Act, codified in Chapter 711, allows an LLC member to designate a beneficiary who will receive the membership interest at death. The transfer occurs automatically without probate, similar to a pay-on-death designation on a bank account.

A TOD designation can be implemented through the operating agreement or through a separate membership interest certificate. The certificate is issued in the form “Owner, transfer on death to Beneficiary.” The approach is straightforward for single-member LLCs where there are no other members whose consent is required and no complex succession plans.

The limitation of a TOD designation is that it controls only who receives the interest—not what rights they receive. The operating agreement must still define whether the TOD beneficiary becomes a full member or merely an assignee. If the operating agreement is silent, the default rules under Chapter 605 apply, and the recipient receives only an assignee’s economic interest without management or voting rights.

Revocable Living Trust Ownership

Assigning an LLC membership interest to a revocable living trust remains the most flexible probate-avoidance approach. The trust holds the interest during the member’s lifetime, and at death, the successor trustee distributes or continues to hold the interest according to the trust terms. No probate proceeding is required because the trust—not the individual—is the legal owner.

A trust does not “own” an LLC interest the way an individual does. The trustee becomes a member of the LLC in the trust’s capacity. The operating agreement must expressly permit trust ownership and define how the trustee exercises membership rights, including voting, management authority, and the right to receive distributions. An operating agreement that restricts transfers or requires unanimous consent for new members may block a transfer to the member’s own revocable trust.

Trust ownership offers advantages beyond probate avoidance. A revocable trust provides for management of the LLC interest during the owner’s incapacity, not just at death. It also allows more complex distribution schemes, such as holding the interest in a continuing trust for a minor child or a spendthrift beneficiary, rather than the simple outright transfer that an operating agreement succession provision provides. Coordinating the trust-owned LLC arrangement requires aligning the operating agreement’s transfer restrictions with the trust’s membership provisions.

When the Operating Agreement and Estate Plan Conflict

The Blechman decision creates a potential trap for LLC owners who do not coordinate their documents. If the operating agreement contains a succession provision and the owner’s will or trust directs the same interest to a different person, the operating agreement controls. The intended beneficiary under the will or trust receives nothing.

This conflict arises most often when the operating agreement was drafted at formation with default succession language and the owner later executes an estate plan without reviewing the operating agreement. The owner may assume the will or trust governs all assets, unaware that the operating agreement already dictates the disposition of the LLC interest.

The fix is coordination. Whenever an LLC member updates an estate plan, the operating agreement needs a corresponding review and amendment if necessary. An operating agreement that defers to the member’s estate plan, providing that the interest passes according to the member’s will or trust, avoids the conflict. The tradeoff is that the interest will go through probate if the member dies without a trust.

How Probate Avoidance Affects Charging Order Protection

An LLC interest held in a revocable trust does not receive charging order protection during the grantor’s lifetime because Florida courts treat a revocable trust as the grantor’s alter ego. Creditors of the grantor can reach assets in a revocable trust as easily as individually owned assets. The asset protection value of the LLC comes from the LLC structure itself—the charging order limitation under § 605.0503—not from trust ownership.

If the owner’s primary concern is creditor protection rather than probate avoidance, the operating agreement succession approach may be preferable. The membership interest remains individually owned during life, preserving the straightforward application of charging order protections for multi-member LLCs. At death, the operating agreement transfers the interest to the designated recipient without probate.

For owners who need both probate avoidance and lifetime creditor protection, the answer depends on whether the LLC is single-member or multi-member. A single-member LLC already faces the limitation that courts may order foreclosure of the membership interest under § 605.0503. Adding a second member strengthens charging order protection regardless of whether the interest is held individually or in trust. Florida LLC asset protection depends heavily on entity structure, and a multi-member LLC receives stronger charging order protections than a single-member LLC under any ownership arrangement.

Practical Drafting Issues

An operating agreement with Blechman-style succession language should address several issues beyond identifying the successor.

The agreement should specify whether the designated successor receives the interest outright or whether the remaining members have a right of first refusal or mandatory buyout option. It should clarify what happens if the designated successor predeceases the member or disclaims the interest. And it should address whether the successor steps into the member’s management role or whether management authority remains with the surviving members while the successor holds only an economic interest.

For real estate holding LLCs, the agreement should also address the mortgage. Many commercial and residential loans contain due-on-sale clauses that could be triggered by a change in LLC membership. The operating agreement should anticipate this issue and provide a mechanism for the successor to address lender requirements without disrupting the probate-avoidance transfer.

The operating agreement is a private document—unlike a will, it is not filed with the court at death. The designated successor should know where to find it and understand that it controls the disposition of the membership interest.