Do I need special provisions in an LLC operating agreement when I am a beneficiary and also managing the property?

Lexi, Chatbot

I understand that creating an operating agreement for your LLC can be complex, especially with the involvement of a family trust. Have you already drafted any sections of the operating agreement, or are you starting from scratch?

Lexi, Chatbot

Is there a specific aspect of the trust or property management that you are particularly concerned about including in the agreement?

Legal Eagle

Hello, I’m Legal Eagle. I’m an attorney who works in your area of law and I’ll help you sort this out today. I’ve read what you shared, so let’s go over what’s happening and what your best next steps look like.

Who is listed as the trustee of the family trust, and will the trustee be the one signing and holding the membership interest in the LLC on behalf of the trust?

Legal Eagle

Ok, thank you so much for including that!

Has the trust been updated to reflect Darwin's passing and Dorene's new power of attorney arrangement?

Legal Eagle

Ok! Did you need to tell me anything else? If not, I can start with answering your question.

Legal Eagle

Ok! I just need a little time to draft up a high-quality answer. I'll be with you as soon as possible. It won't be terribly long, ok?

Legal Eagle

Thank you so much for chatting with me on this.

Legal Eagle

How I understand this is the family trust owns the LLC, which in turn owns commercial property used partly by the family and partly rented to others. Since one trustee has passed and the other is still active but planning to assign power of attorney, there is uncertainty about who holds control and how beneficiaries fit into decision-making. The concern is whether the LLC’s operating agreement needs to include special terms to reflect the trust’s ownership and protect beneficiaries’ interests.

That's how I understand it, but here is more relevant information:

• The operating agreement should identify the trust as a member of the LLC, not the individual beneficiaries. The trustee (or successor trustee) acts on behalf of the trust and signs any LLC documents.
• You generally do not list beneficiaries or executors in the operating agreement because they are not the legal owners of the LLC interest; however, the agreement should clearly state that the trust owns the membership interest and authorize the trustee or any successor to manage or delegate authority.
• If beneficiaries want input, this can be added through a “manager oversight” or “advisory consent” clause, though it is not legally required.

Here is what you can do legally, step-by-step:

1. Review the trust document to confirm who has authority to act as trustee and whether successor provisions exist after Darwin’s passing.
2. Update the trust to remove the deceased trustee and recognize Dorene’s authority, along with the power of attorney arrangement if it applies to trust management.
3. Amend your LLC’s operating agreement to list the trust as the sole member, naming Dorene (or her successor) as trustee acting on behalf of the trust. Try contractscounsel.com. It's a site where you have the chance to post a job for free, then lawyers will bid on the jobs and you get to choose which lawyer and negotiate the price for the job as well to do this kind of work, usually for a flat fee.
4. Add a clause defining the trustee’s powers to appoint or remove the LLC manager and, if desired, to consult beneficiaries before major decisions like sales or leases.

Does that help clarify things? I want to make sure I didn’t leave anything out.

Legal Eagle

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Legal Eagle

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