Like many business owners, those who find success in the cannabis industry often want to leave their assets to friends and family at death. Unlike many other business owners, however, successful cannabis business owners’ largest assets are likely to be tied to what the federal government considers an illegal criminal enterprise. Whether you wish to bequeath a large grow operation, an ownership interest in a dispensary, or even a small personal stash, transfers of cannabis-related assets at death present unique challenges for individuals and estate planning professionals. No matter the situation, the basic question remains the same: What happens to my weed when I die?
Law professor Gerry W. Beyer of Texas Tech and Brooke Dacus published a law review article last year that sought to answer this question. It is an essential read for anyone in the cannabis industry considering how to arrange their affairs and the distribution of cannabis-linked assets at death. As is the case with many issues surrounding state-legal cannabis, a critical issue is the differential treatment of marijuana under state and federal law. Even in the realm of state law, however, the use of cannabis – even as part of a state-legal medical marijuana program – can raise issues related to one’s capacity to execute a will or even receive distributions from certain trusts. Beyer and Dacus do an excellent job awill actually be seized, it is impossible to know if that will be the case when it is time for a will to be administered.
What is more, a beneficiary may be criminally liable for possessing illegal materials like cannabis by function of the administration of the will itself. Beyer and Dacus draw a poignant analogy to a case where a beneficiary was found guilty of illegally possessing a firearm by a felon after having been given his father’s antique war-era gun at his father’s death and then keeping that gun unloaded in a closet. The court held that the heir’s possession of the firearm in a space the heir controlled was enough to violate the law. Beyer and Dacus also ask whether and to what extent an executor can administer an estate without exposing themselves to criminal liability. At least one federal court case cited by Beyer and Dacus suggests courts will not permit an executor to administer a will that includes cannabis, leaving the door open to penalties or perhaps even prison for someone who does so. It is important to note that cannabis and cannabis-related assets are subject to estate tax regardless of their legality.
Still other issues cloud the presumptive validity of a will executed by a testator who frequently uses cannabis or is under the influence of cannabis at the time of will execution. Though past habitual “drug use” has been found to interfere with testamentary capacity in some instances, Beyer and Dacus suggest most wills will be valid when an individual who uses cannabis is in fact in a state of mind to make estate planning decisions. Nonetheless, cannabis users and business owners should at least consider taking extra steps to demonstrate their testamentary capacity, such as by using a video explaining their intent, for example.
The wave of cannabis reform in the United States has been a game changer in many arenas, including the seemingly mundane like estate planning. Yet law can often be slow to catch up. Cannabis is a multibillion dollar industry on the cusp of even greater expansion, and those who reap the spoils should consider how to best protect and share their success with future generations.
Who knows, maybe someday cannabis estate planning will be a legal speciality.