Minnesota has a professional firms act that requires licensed professionals (as defined in MN Statute 319B.02 subd.19) to, among other things, register their business as a professional firm. One particular requirement of the statute, that all owners of the business be licensed professionals, often makes succession planning a challenge.
Under most circumstances, an LLC member can transfer his or her interest into a revocable trust for estate planning purposes. However, when an entity is registered under the professional firm act (for example, a Professional Limited Liability Company) the professional member cannot transfer his or her interest into a revocable trust.
One option for the professional member who wants to avoid the probate process is to consider a transfer on death designation. The designation transfers the LLC interest to a trust upon the professional’s death. To ensure that the LLC does not violate any rules, the trust terms should comply with the statute and the requirements of the profession’s governing board. If the transfer on death designation is property drafted and executed, the trustee can dissolve or sell the business outside of the probate process.
