Can a Will Override an LLC Operating Agreement in New Jersey? | New Jersey Estate Planning | FastCounsel
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Can a Will Override an LLC Operating Agreement in New Jersey?

Short Answer

No. In New Jersey, a last will generally cannot “override” a binding operating agreement for a limited liability company (LLC). You can try to leave your LLC interest to your son in your will, but the transfer will be subject to the LLC’s operating agreement and any applicable New Jersey law. Many operating agreements limit transfers, require member consent, or treat a decedent’s estate differently than a full transferee.

Detailed Answer — How this works under New Jersey law

Start with two basic legal principles:

  • A will controls the disposition of the decedent’s probate assets subject to any binding contracts or property restrictions that were created during life.
  • An LLC operating agreement is a contract among members that can place limits on assignment, admission of new members, buyout rights, and what happens on a member’s death.

Because an operating agreement is a contract, its terms usually bind members and their estates. If the operating agreement contains transfer restrictions (for example, a right of first refusal, a requirement that the other members consent before a transferee becomes a full member, or a mandatory buyout on death), those terms will typically control what happens when you try to give your interest away by will.

Typical provisions that affect whether a will can give your interest

  • Transfer and assignment clauses: Many agreements let you transfer only your economic interest (right to distributions) but not governance rights without unanimous or majority approval.
  • Admission of transferees: Operating agreements often say an assignee (including an estate beneficiary) is not admitted as a member unless the other members approve.
  • Buy-sell or redemption on death: The LLC or remaining members may have the right (or obligation) to buy your interest at a specified valuation upon death.
  • Death or incapacity provisions: Some agreements set out a special process for estates, including timelines, notice requirements, or valuation mechanics.

What usually happens in practice

If your will leaves your LLC interest to your son, one of these common outcomes will occur, depending on the operating agreement:

  • Your son receives only the economic rights (distributions) but cannot participate in management unless members consent.
  • The LLC or other members exercise a buyout clause and pay your estate for the interest rather than admitting your son as a member.
  • The transfer is blocked or restricted (e.g., other members have a right of first refusal) and the estate or your chosen beneficiary must comply with the contract process.

New Jersey statutory backdrop and resources

New Jersey’s laws governing LLCs and member rights are available through the New Jersey Legislature and other New Jersey state sites. These laws do not generally allow a will to nullify a valid contractual restriction contained in an operating agreement. For statute texts and official guidance, consult the New Jersey Legislature and the New Jersey Courts information pages:

Practical steps to take now

  1. Locate and read the operating agreement. Focus on transfer, death, buyout, and admission provisions.
  2. Check whether your interest is a full “membership interest” (management plus economic rights) or only economic rights that may be freely transferred.
  3. If you want your son to have management rights, consider whether you can amend the operating agreement now (most agreements provide an amendment process) to permit the transfer on death or to name your son as an admitted transferee.
  4. Consider an inter vivos transfer—giving or selling the interest to your son while you are alive—if the operating agreement allows it or if members consent.
  5. If the agreement requires buyout on death, determine the valuation method and whether you prefer a buy-sell amendment or life insurance to fund a buyout.
  6. Provide clear instructions in your estate plan and coordinate your will and any LLC amendments so beneficiaries understand what they will receive.

When a will might still be useful

A will can still direct that the estate try to transfer the membership interest to your son, or that proceeds from a required buyout be paid to him. The will can also name your son as executor to manage those post-death steps. But the will can’t force the LLC or other members to ignore express contractual restrictions in the operating agreement.

Helpful Hints

  • Don’t assume “interest” means the same thing in every agreement—check whether it’s a managerial (voting) interest or only economic rights.
  • Create or update a buy-sell plan to avoid probate fights and to set valuation and payment terms ahead of time.
  • Talk to the other members if you want your son admitted; unanimous cooperation can simplify everything.
  • Keep business records and copies of the operating agreement with your estate planning documents so your executor can act quickly.
  • Consider life insurance owned by the LLC or a cross-purchase policy to fund buyouts to avoid forcing the estate to sell other assets.
  • If the operating agreement is silent or ambiguous, the LLC’s default statutory rules may apply—this is a complex issue that benefits from legal review.

When to consult an attorney

Get advice from a New Jersey attorney experienced in both business and estate planning if any of these apply:

  • Your operating agreement contains unclear or restrictive transfer/death provisions.
  • You want your son to have management rights, not just economic benefits.
  • You need to amend the operating agreement or negotiate with other members.
  • You face tax or valuation issues that affect the estate or beneficiaries.

Disclaimer: This article provides general information about New Jersey law and does not constitute legal advice. It is not a substitute for consulting a licensed attorney who can apply the law to your specific facts.

The information on this site is for general informational purposes only, may be outdated, and is not legal advice; do not rely on it without consulting your own attorney.