An LLC membership interest is an asset like any other. When you die, it goes through probate unless you plan for it, and the default result is worse than probate alone. Under Texas Business Organizations Code Section 101.1115, your heirs receive your interest as assignees. An assignee gets the money but not the vote. They cannot manage the company, sign for it, or admit themselves as members. The LLC you created to hold the property becomes a company that no one is authorized to run.

There are two clean ways to keep an LLC interest out of probate.

The first is to transfer the LLC to a revocable living trust during your lifetime. We cover that process in detail in Transferring a Texas LLC to a Trust. This is the better fit if you already have a trust, want someone to manage the interest for minor children, or have several heirs and want one set of instructions controlling everything.

The second is to keep the interest in your own name and designate a beneficiary of your interest in accordance with the company agreement. This is the simpler fix for a single-member LLC with one adult beneficiary. The rest of this article is about that option.

A beneficiary designation has two jobs, and most do only one.

Job one is the transfer: on your death, your membership interest passes to the person you named, with a backup if that person does not outlive you.

Job two is admission. Because of Section 101.1115, a transfer by itself only makes your beneficiary an assignee. The company agreement has to go a step further and admit the beneficiary as a full member, with management rights, effective on your death. Without that second step, you have handed someone a bank account they cannot open.

A well-drafted beneficiary designation also says the designation is revocable, that you can change it without the beneficiary's consent, and that a later will does not override it. That last point matters because a will is testamentary and a beneficiary designation is not; the two operate on separate tracks.

The mechanics run in two pieces. The company agreement authorizes the designation and says what happens when one is used. The member then signs a separate beneficiary designation, delivers it to the company, and can replace it later by delivering a newer one. Section 111.052 allows exactly that, as long as the designation is signed at the same time as the company agreement or afterward. A form pulled from the internet with no supporting language in the company agreement does not do the job, because the company agreement is what governs who is a member.

If you are married, your LLC interest is probably community property, even if only your name is on it. A beneficiary designation can only give away what is yours. Your spouse's community property interest stays your spouse's.

That means one of two things: your spouse signs off on the designation, or you handle the characterization first with a marital property agreement.

A Series LLC adds a layer. Under Business Organizations Code Sections 101.601 and 101.607, each series can have its own members and its own classes of membership interests. That means a designation can name a beneficiary for the Series LLC and a different beneficiary for Series A, or one beneficiary for the whole company.

If we formed your LLC, your company agreement already includes the beneficiary designation provision. If you formed your LLC elsewhere or drafted the company agreement yourself, it probably doesn't include this language, and adding it requires a company agreement amendment.

If a trust is the better fit for your situation, start with the trust transfer article instead. Either route safeguards the company. The mistake is picking neither.