What happens to my share of an LLC when I die, if I have partners?
Your will or trust decides who receives your share, but your operating agreement decides what they can do with it. Under California’s LLC law your estate steps into your economic rights, such as distributions, without becoming a voting member, and many operating agreements require the company or the other members to buy the share at a set price instead. A buy-sell agreement funded with life insurance is how that price gets paid in cash to your family.
Decide where your business goes.
- Will packageA last will and testament, prepared online from your answers.from $695
- Trust packageA revocable living trust with a certification of trust and a pour-over will, prepared online from your answers.from $1,495
Starting prices, per person. Couples can set up a joint trust for both of you, or two plans with $100 off the second.
- Free health care directive: Says who decides about your medical care if you cannot, and what you want.
- Free financial power of attorney: Names who can handle your money matters if you are alive but unable to act for yourself.
Boring Insurance Agency is a licensed insurance agency, not a law firm, and does not provide legal advice. No attorney-client relationship is created by using this service. These documents are self-help forms prepared from the information you provide. Laws vary by state, and your circumstances may require changes these forms do not make. We recommend you have an attorney licensed in your state review your documents before you sign them.
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Kevin Kelsey
Founder | Principal Agent
Founder and principal agent of Boring Insurance, CA License #6011822. He put off his own estate plan because he did not want to take the time to find a lawyer, then built the offer so owners can set up a will or living trust online and fund it with life insurance. He is a licensed agent, not an attorney, and these pages are not legal advice.
Which document decides what
Your will or living trust
- What it decides
- Who receives your share
- Who writes it
- You, from attorney-approved forms, or an attorney
Operating or partnership agreement
- What it decides
- Whether the share can transfer, voting rights, any right to buy it first
- Who writes it
- The owners, usually with an attorney
Buy-sell agreement
- What it decides
- Who must buy the share, at what price and on what terms
- Who writes it
- An attorney, for all the owners
Life insurance
- What it decides
- Where the money for the buyout comes from
- Who writes it
- A licensed agent places it; the agreement says who owns it
Boring sets up wills and living trusts and places the life insurance. We do not draft operating or buy-sell agreements; your attorney should check that all four line up.
The detail
In California a member is dissociated from an LLC when "The person dies."
California Corporations Code section 17706.02 (dissociation of a member)
California lets a deceased member’s representative exercise "the rights of a transferee" and, only "for the purposes of settling the estate," a member’s information rights.
California Corporations Code section 17705.04 (deceased member’s representative)
Under the same law a transfer of an LLC interest does not entitle the transferee to participate in management or to the company’s records, except as the statute allows.
California Corporations Code section 17705.02 (transfer of a transferable interest)
Federal law says "Gross income does not include amounts received under a life insurance contract, if such amounts are paid by reason of the death of the insured," with exceptions for policies transferred for value and some employer-owned policies.
26 U.S. Code section 101 (Cornell Legal Information Institute)
In Connelly v. United States the Supreme Court held that "A corporation’s contractual obligation to redeem shares is not necessarily a liability that reduces a corporation’s value for purposes of the federal estate tax." The company there held $3.5 million of life insurance on each of two brothers to fund the buyout.
Connelly v. United States, 602 U.S. ___ (2024), decided June 6, 2024
What this means for you
- Read your operating agreement before your will. If it gives the other members a right to buy your share, your family receives money, not a seat at the table. That is often what everyone wants, as long as the money exists.
- Fund the promise. An agreement that obliges your partners to buy your share for a million dollars is only as good as the million dollars. Life insurance on each owner is the usual way the cash exists on the day it is needed.
- Name your trust, then decide who owns the policies. Your trust can receive the buyout money or your share. Whether the owners insure each other or the company insures everyone is an agreement question with tax consequences, so your attorney and CPA should choose.
- Keep the numbers current. A price set when the business was worth half what it is now shortchanges your family. Revisit the value and the coverage together.
Related questions
- Can my partners stop my spouse from inheriting my share?
They can usually stop your spouse from becoming a voting member, and many agreements give the company or the members the right or the duty to buy the share. Your spouse still receives the value, either as distributions or as the buyout price.
- What if we never signed an operating agreement?
Then your state’s LLC law fills the gaps, and in California your estate steps into your economic rights without management rights. Nobody is obliged to buy the share and nobody has to pay for it, which is the situation a buy-sell agreement exists to prevent. Talk to an attorney.
- Do you write buy-sell agreements?
No. We are an insurance agency. We set up wills and living trusts through our document platform and place the life insurance that funds a buy-sell. The agreement itself should be drafted by an attorney who represents the owners.
- How much life insurance does a buy-sell need?
Roughly each owner’s percentage times the business value the agreement uses, reviewed whenever that value changes. Our Plan Check works it out from your share and a value range.
- Funding a buy-sell with life insurance
Set it up, then fund it
We set up wills and revocable living trusts through our online document platform, from $695 for a will and $1,495 for a trust, and we place the life insurance that pays into them. We do not draft operating, partnership or buy-sell agreements, and we do not give legal advice; when your situation needs an attorney, the Plan Check says so.
Boring Insurance Agency is a licensed insurance agency, not a law firm, and does not provide legal advice. No attorney-client relationship is created by using this service. These documents are self-help forms prepared from the information you provide. Laws vary by state, and your circumstances may require changes these forms do not make. We recommend you have an attorney licensed in your state review your documents before you sign them.
Written by Kevin Kelsey, founder and principal agent, CA License #6011822. Last updated 2026-10-05. See all guides.