Debt after Death

Is the Property Owned By a Decedent’s Business Entity an Asset of the Estate?

In a recent case, Ezeamama v. Estate of Chibugo, 2024 WL 1894863 (Fla. 3d DCA May 1, 2024) the Decedent Catherine Ezeamama Chibugo was the sole member of a limited liability company at the time of her death. Creditor Carmel Investments filed a claim against Decedent’s estate for the balance of a note and mortgage on property owned by the LLC.

The personal representative of the estate filed a motion to determine estate assets, seeking a determination that the real property owned by the LLC was not an estate asset. The trial court ruled that the LLC dissolved immediately upon Decedent’s death, and the LLC’s assets including the real property were therefore estate assets and subject to Carmel’s creditor claim.

The appellate court reversed. It held that the assets of an LLC, even though owned by a single member, are not estate assets. The court further held that the LLC did not immediately dissolve upon the Decedent’s death, pursuant to chapter 605, Fla. Stat.:

Though the death of an LLC member is an event causing dissociation, dissolution is not automatic; rather, the LLC must be formally dissolved.

Accordingly, when the Decedent died on March 23, 2023, she was dissociated from the LLC under section 605.0602(7)(a). Not until ninety days after she passed—well after the probate court’s April 6, 2023 denial of the Motion to Determine Assets—did it become an event causing dissolution under section 605.0701. Section 605.0707 then requires the LLC to be dissolved by filing articles of dissolution. Still, the LLC continues for certain purposes, such as winding up.

Id. at *2. The court noted that the same principle applies to a corporation:

Although the case at hand deals with an LLC rather than a corporation, the same principle is applicable: an LLC is an entity separate from its members, just as a corporation is separate from its shareholders.

Id. at n. 4. Corporate shares and membership interests in LLCs are part of a decedent’s estate, but the property owned by a corporation or an LLC is “a step removed from the Estate.” Id. at 1.