Wills, Trusts & Estates Prof Blog

Editor: Gerry W. Beyer
Texas Tech Univ. School of Law

Friday, April 13, 2018

Article on Making a Pipe Dream a Reality: The Legislation Estate Planners Need to Get Marijuana Based Assets out of Limbo

image from https://s3.amazonaws.com/feather-client-files-aviary-prod-us-east-1/2018-04-13/ebbd8fc8-dd4f-4186-877c-7bafac4adf2d.pngSergio Herrera published an Article entitled, Making a Pipe Dream a Reality: The Legislation Estate Planners Need to Get Marijuana Based Assets out of Limbo, 10 Est. Plan. & Comm. Prop. L.J. 157 (2017). Provided below is an abstract of the Article:

“If you build it, [they] will come.” That seems to have been the mindset of the members of the 84th Session of the Texas Legislature who voted on the passage of Senate Bill 339, known as the Compassionate Use Act, which proposes to allow epilepsy patients to purchase and use low-THC cannabis. If S.B. 339 becomes law, then Texas will become the 30th state to legalize some form of marijuana over the course of the past twenty-years. However, even though over half of the United States allows for citizens to start and engage in businesses within this newly legalized industry, none of these states are enacting legislation that deals with the certainty that every person, in and affected by the marijuana industry, faces-- death.

Heavy regulations, specifically, the requirement that any persons involved in the marijuana industry be licensed, are creating serious obstacles for estate planners with clients who want to pass marijuana based assets to their heirs and devisees. Moreover, many states define ownership in such a way that people, not directly involved in the business, are considered to be owners in the business. For example, in Colorado, if you receive any benefit from the business, then you are considered an owner, and therefore need a license.

This comment will examine the nature of the legalized marijuana industry and how this industry is affecting estate planners. This comment aims to shine a light on what estate planners and legislators alike can do to make sure that estate planning legislation grows as the marijuana industry grows.

First, this comment will discuss how marijuana laws have, in contrast to stagnant federal laws, evolved amongst the different states This history will help show the direction, over the past two decades, that marijuana laws evolved at the state level

Second, this comment will discuss the threshold question of whether lawyers in Texas may advise clients engaged in the marijuana industry While the Federal Government has stated that the prosecution of state legalized marijuana operations is not a priority, the cultivation, sale, and possession of marijuana is still a federal crime in the United States It does not make sense for states to neglect to update and offer guidance in their respective rules of professional conduct, so that lawyers may know the extent to which they may advise their clients. Colorado's Comment 14 to their Rule 1.2(d) will be used as an example of how Texas can help its estate planning attorneys

Third, this comment will briefly examine the assets an estate planner can expect licensed members of the marijuana industry to want to include in their wills While this section of the comment will discuss operator's needs to purchase and invest in equipment such as lights, hydroponic growing machines, and planting equipment, it will also try to explain how the low-THC requirement will affect the cost of investment for licensed operators in Texas

Fourth, this comment will walk through different hypotheticals to illustrate common scenarios members of the marijuana industry might face and need legal assistance with. The first hypothetical will show how Colorado's Rules of Professional Conduct treat attorneys providing advice to clients in the marijuana industry Specifically, this hypothetical will examine how serving as a personal representative affects all parties involved. The second hypothetical will consist of two sub-hypotheticals concerning a decedent dispensary operator, who owns marijuana plant inventory, and who has setup his or her operation as an LLC. The first sub-hypothetical will discuss when the lawyer serves as a personal representative and the heir/devisee is an in-state resident. The second sub-hypothetical will discuss when the lawyer serves as the personal representative and the heir/devisee is an out-of-state resident. The second sub-hypothetical will also involve the dispensary operator/owner, who has a minor child and wants to pass down the business to the minor-child.

Last, this comment will offer proposed legislative language that will provide state representatives with some guidance on how to update the Texas Estates Code so that the Code reflects the effects of S.B. 339's proposals. Currently, the Texas Estates Code does not mention or deal with how marijuana-based assets, such as dispensing organizations, are to be handled upon the death of a licensee. The Texas Estates Code only references drugs in section 251.001; however, section 251.001 only deals with a testator's capacity during the will making process.


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