What Happens to a Georgia LLC When the Owner Dies
Under O.C.G.A. § 14-11-506, when a Georgia LLC member dies, the estate’s legal representative receives the rights of an assignee — not the rights of a member. An assignee holds economic rights only. They receive distributions and profit allocations. They cannot vote, manage the business, call meetings, or make decisions.
This is the default rule. It applies to every Georgia LLC unless the operating agreement says otherwise. For a multi-member LLC, it means your family receives your profit share while your surviving partners retain all management authority. For a single-member LLC where you are the last remaining member, there is one exception: the representative receives full member status by default.
There are three problems that flow from this default rule. First, your LLC interest passes through probate before your family receives anything — adding months to an already difficult process. Second, your family has no authority over business decisions during that probate period. Third, if your operating agreement is silent on succession, there is no agreed mechanism for how the business continues.
These three problems — probate exposure, governance gap, and no transfer mechanism — are what a succession plan is designed to solve. Each requires a different document.
What Your Operating Agreement Probably Gets Wrong
Template operating agreements address membership percentages, voting rights, and profit distributions. They do not address what practitioners call trigger events — the specific circumstances that require a transfer of ownership or authority.
A succession-ready operating agreement defines five trigger events as distinct situations with distinct consequences: the death of a member, the disability of a member, a member’s voluntary departure, the involuntary removal of a member, and a member’s retirement. Each event needs its own set of rules because the appropriate response differs. Death triggers a transfer to a trust or named successor. Disability may trigger a temporary management arrangement. Voluntary departure triggers a buyout at a defined valuation method. Removal triggers a different buyout procedure. Retirement may trigger a phased transfer.
The operating agreement also needs to explicitly authorize trust ownership. Most standard templates include transfer restrictions that, read literally, could block you from transferring your membership interest to your own revocable trust. Before you fund a trust with your LLC interest, confirm your operating agreement permits it and grants the successor trustee full member rights — not just assignee rights — when you die.
Updating the operating agreement is step one in any LLC succession plan. Every other document depends on it. A buy-sell agreement that references a valuation method the operating agreement contradicts creates a legal conflict. A trust that holds your LLC interest but is granted only assignee rights by the operating agreement defeats the purpose of the trust.
For a deeper look at what these provisions must say, see Problems With Business Succession Plans in Georgia.
How a Revocable Trust Keeps Your LLC Out of Probate
An LLC membership interest held in your personal name is personal property. When you die, it passes through your estate and goes through probate before your family receives it. Probate in Georgia takes 12 to 24 months on average for a business estate. During that period, the probate court controls the process and your family waits.
Placing your LLC membership interest into a revocable trust during your lifetime removes it from your probate estate. When you die, the successor trustee steps in immediately. No court filing. No waiting period. The business continues without a gap in ownership.
There is one limitation to be clear about: a revocable trust does not protect your LLC interest from your personal creditors during your lifetime. Under O.C.G.A. § 53-12-82, you can revoke and amend a revocable trust at any time, which means your creditors can reach the trust assets. The trust solves the probate problem. It does not solve the creditor protection problem.
Two conditions must be met for the trust to work correctly. First, your operating agreement must explicitly authorize trust ownership of a membership interest. Second, the operating agreement must grant your successor trustee full member rights — not assignee rights — when you die. If the operating agreement only grants assignee rights to the trust, your successor trustee inherits the same governance limitation your heirs would have faced under the default rule.
For the complete transfer process, see How to Transfer Your LLC Into a Trust in Georgia.
The Buy-Sell Agreement Problem After Connelly
If you own your Georgia LLC with one or more partners, you need a buy-sell agreement. It defines what happens to a partner’s ownership when they die, become disabled, or leave the business. Without one, your partner’s estate owns their share and your surviving partners have no agreed mechanism to buy it back.
Most existing buy-sell agreements use an entity-purchase structure: the company purchases the deceased owner’s interest using life insurance proceeds paid to the company. After the Supreme Court’s 2024 ruling in Connelly v. United States, this structure creates a significant estate tax problem.
The Supreme Court unanimously held that life insurance proceeds received by a company to fund a redemption inflate the company’s fair market value for estate tax purposes. The redemption obligation does not offset this increase. In the actual case, this produced $889,914 in additional estate tax beyond what the family had reported.
The structure that avoids this problem is a cross-purchase agreement: each partner purchases life insurance on the other partners personally. When a partner dies, the surviving partners use those insurance proceeds — which never flow through the company’s balance sheet — to purchase the deceased partner’s interest directly. The company’s value is not inflated by insurance proceeds it never received.
A note on scope: Connelly involved a corporation, not an LLC. Post-ruling analysis from multiple law firms concludes the same reasoning applies to LLCs because the estate tax valuation logic is entity-agnostic. This has not been litigated for LLCs specifically. Georgia LLC owners with existing entity-purchase buy-sell agreements should have the agreement reviewed.
For a detailed comparison of both structures, see Cross-Purchase vs. Entity Redemption Buy-Sell Agreement in Georgia.
Incapacity Planning Is Not the Same as Succession Planning
Many Georgia business owners treat a durable power of attorney as their succession plan. It is not. A durable power of attorney terminates automatically at the moment of your death under O.C.G.A. § 10-6B-9(a)(1). It cannot substitute for a succession plan.
What a durable POA can do: authorize your agent to manage your LLC interest during a period of incapacity — signing documents, attending to business matters, exercising membership rights. This matters for a manager-managed LLC where you are the sole manager. If you become incapacitated and no successor manager is named in the operating agreement, your POA agent may be the only person with any authority to act on the LLC’s behalf during that gap.
What a durable POA cannot do: it cannot transfer your LLC interest after your death, it cannot authorize your agent to act as your successor once you die, and it does not solve the governance gap that arises when a manager-managed LLC’s manager dies without a named successor in the operating agreement.
A complete incapacity plan for a Georgia LLC owner requires the operating agreement to name a successor manager — or a mechanism for appointing one — and a durable POA that works alongside those provisions, not as a substitute for them.
Which Strategy Is Right for Your Georgia LLC
The right succession strategy depends on your ownership structure.
1
Single-Member LLC
Update your operating agreement to name a successor member and authorize trust ownership with full member rights. Transfer your LLC interest into a revocable trust. Add a durable POA for incapacity. No buy-sell agreement is needed — there are no partners to buy your interest.
2
Multi-Member LLC
Update your operating agreement to cover all five trigger events and authorize trust ownership. Transfer your LLC interest into a revocable trust. Add a cross-purchase buy-sell agreement — not an entity-purchase structure — funded by individual life insurance policies. Have any existing entity-purchase agreements reviewed in light of Connelly (2024).
3
Manager-Managed LLC
All of the above, plus explicit operating agreement language naming a successor manager and defining the appointment process when the current manager dies or becomes incapacitated. The governance gap in a manager-managed LLC is larger than in a member-managed structure — the business cannot make binding decisions until a new manager is formally in place.
For any Georgia LLC owner with an estate above $13,990,000 — the 2025 federal exemption — irrevocable trust planning becomes an additional layer alongside the operating agreement and revocable trust. That threshold is scheduled to drop to approximately $7,000,000 per individual when the current exemption sunsets in 2026. If your business approaches that range, the succession planning conversation includes estate tax reduction strategies, not just governance and probate avoidance.
For a full overview of how these documents work together, see Best Estate Planning for Business Owners in Georgia.
