Since 1970, cannabis is considered a Schedule I substance under the federal Controlled Substances Act (CSA)—along with heroin, LSD, and cocaine. Unauthorized cultivation, distribution, or possession of cannabis and knowingly or intentionally manufacturing, distributing, or dispensing it are federal crimes, unless used for federally approved research.
Nevertheless, as of January 2019, nearly two-thirds of the states, Guam, Puerto Rico, and the District of Columbia permit the legal use of cannabis for medical reasons, and 10 states for recreational purposes. Retail sales are permitted in Alaska, California, Colorado, Massachusetts, Michigan, Nevada, Oregon, Vermont, and Washington, with Maine set to begin retail sales in the summer of 2019. Washington, D.C. permits recreational use, but not on federal property, which significantly limits availability. (Consumption on all federal land and some Indian reservations is illegal.) Although Washington D.C.’s laws do not allow the retail purchase of marijuana in a traditional buyer-seller exchange, they allow the purchase of another item, good, or service—and then receive a free marijuana product that is “gifted” or donated by the vendor, instead. Gifted items may include stickers, shirts, cups, and other trinkets.
Only four states prohibit all use of cannabis in all forms: South Dakota, Nebraska, Kansas, and Idaho.
According to studies by Arcview Market Research, legal cannabis is among the fastest-growing markets in the United States. Arcview estimates that $11 billion in consumer worth of legal cannabis was sold in 2018, and more than $23 billion will be sold by 2022.
The path to how some states have navigated these punitive statutes and passed legislation allowing the medical and even the recreational use and sale of marijuana is not a straight line. The following is a description of the major points on that path. For the brave, yet cautious, this is a general overview of the federal and state legal landscape and discussion of the estate planning, tax, and ethical considerations for attorneys giving advice where cannabis is part of an estate plan or probate.
CANNABIS IN THE ESTATE PLAN
It is likely that estate planners increasingly will find themselves in the position of advising clients with cannabis-related assets. For those clients owning cannabis related businesses lawyers will need to be able to provide advice on how to handle the potentially tremendous revenue in light of federal banking, money laundering, and other regulations.
Before accepting a client with cannabis or a cannabis related business a lawyer should consider their intake procedure. There are two general categories of potential clients in the cannabis arena: (1) those that have direct contact with cannabis because they manufacture, distribute, or sell marijuana in compliance with state law, and (2) third parties that assist or advise on cannabis topics and refer clients to the businesses with direct contact. These include doctors, bankers, investors, lawyers, landlords, real estate brokers, accountants, and ancillary service providers. The first category carries more risk.
The lawyer may want to consider a questionnaire and/or a criminal background check to be certain that the potential client is legally permitted to engage in such business activities. It would also be prudent, in the attorney’s engagement letter, to disclose to the potential client that because cannabis is illegal under federal law, if the federal law were to enforce the CSA against activities otherwise lawful under state law, the terms of representation would have to be revisited and representation may have to be terminated. The attorney should consider advising the client that if he or she engages in violations of applicable state law, or in a manner that would be cause for federal prosecution, the lawyer may withdraw from representation. And a client should also understand the limitations on confidentiality if the lawyer’s services are enlisted to plan or commit a crime.
At the document drafting stage, testators and grantors often wish to limit gifts based on certain conditions, one of which is often the use of illegal drugs. Drafters will now need to carefully specify when the restriction applies, what law applies (if state law, then which one, or federal law), and whether cannabis is included as an illegal drug. One option would be to refer instead to abuse of “mind-altering drugs, whether legal or illegal.” The following is an example of a clause making distributions conditional on drug use:
“Suspension of Distributions. If the trustee at any time suspects that a beneficiary is using any substance (including, without limitation, drugs, chemicals, or alcohol) in an abusive manner or is engaging in any abusive addictive behavior, the trustee is authorized to request that the beneficiary submit to one or more examinations determined to be appropriate by a licensed and practicing physician, psychiatrist, or other appropriate health care professional selected by the trustee. The trustee may request the beneficiary to consent to full disclosure by the examining doctor or facility to the trustee of the results of all such examinations, and the trustee may totally or partially suspend or withhold all distributions until the beneficiary consents to one or more examinations and disclosure to the trustee, and those examinations indicate no such use or behavior.”
Where a beneficiary of a marijuana-related asset may be a minor, it is important to contemplate how that beneficiary may benefit from inherited assets without running afoul of the many laws preventing minors from possessing or owning any such assets, either outright or in trust. While the laws in each state will differ and the following has not yet been tested, perhaps the following limitation may allow a trustee to hold such an asset during the minority of a beneficiary (if not longer):
“Distribution of Cannabis Assets. Any beneficiary who has not reached the age of majority at the time of my death may not receive outright any cannabis-related assets, licenses, permits, interest in entities, or other related property (“cannabis assets”). Instead, he or she may receive financial benefits, in the sole discretion of my trustee, from cannabis assets, which may include a legally operated cannabis-related business so long as the trustee manages the funds generated by such assets until said beneficiary reaches the age of majority. Once such beneficiary reaches the age of majority, he or she must obtain the appropriate licenses and permits and comply with all applicable regulations to qualify to legally own the cannabis assets outright and free of trust.”
When a cannabis business is owned by two or more unrelated entities, the owners should investigate cross-purchase plans, buy-sell agreements, or entity purchase plans. Through careful planning, individuals may be able to avoid some of the more difficult issues related to the transfer of cannabis licenses.
A testamentary instrument transferring an interest in cannabis (or any other highly regulated asset) should consider allowing the fiduciary to appoint an independent fiduciary to carry out those duties the appointing fiduciary may not. The following is a provision identifying only a partial list of tasks for an independent trustee:
“Independent Trustee—Special Powers. In addition to all other powers as trustee, an independent trustee shall have the following powers and authority: (i) to amend the trust as the independent trustee deems necessary to carry out my intent in establishing the trust or to otherwise allow the trust to be administered in a more administrative or tax efficient manner given current or future federal or state laws; provided that any amendment may not affect the beneficial enjoyment of the trust estate; (ii) in general, to avail the trust and beneficiaries of opportunities under existing and future laws that may require extraordinary action such as, but not limited to: division of trusts into separate shares, creation of new trusts for the purposes of holding specific property or interests, and limiting distributions from a new trust to an ascertainable standard or to permissible recipients; and (iii) to deal with any regulated assets that a fiduciary is not able to administer because of state law or other circumstances, which prevent such fiduciary from administering such assets. All actions taken by an independent trustee hereunder should be consistent with, though not necessarily in literal compliance with, the dispositive scheme of the trust. An independent trustee shall be under no duty to exercise any power granted under this section and shall be held harmless and indemnified against any liability, claim, judgment, expense, or cost arising from or attributable to his or her exercise or failure to exercise any power granted under this section, except as provided in [section re trustee standard of care].”
How cannabis and cannabis related businesses are to be handled in an estate is an area with more questions than answers. When an estate or a trust includes a retail, processor, or producer cannabis license, a named fiduciary first must determine whether he, she, or it is able to serve and if so, is the fiduciary willing to serve. While an individual may comfortably rely on the enforcement priorities outlined in Cole II (discussed below), it is likely that a named corporate fiduciary will decline its appointment. In addition, given the FinCEN guidance, also discussed below, a fiduciary should consider whether a financial institution will even work with a trust or an estate that includes property related to or derived from the production or sale of cannabis.
Oregon has contemplated, to a limited extent, what happens to cannabis in a decedent’s estate. Or. Rev. Stat. 475B.033(1) and (2) provide: “The Oregon Liquor Control Commission may, by rule or order, provide for the manner and conditions under which: (1) Marijuana items left by a deceased, insolvent or bankrupt person or licensee, or subject to a security interest, may be foreclosed, sold under execution or otherwise disposed[; and] (2) The business of a deceased, insolvent or bankrupt licensee may be operated for a reasonable period following the death, insolvency or bankruptcy.”
Unlike Washington, discussed below, Oregon does not provide a clear procedure for continuation of a decedent’s business. Presumably, like Washington, any beneficiary and/or operator of a cannabis business would need to independently qualify to hold any applicable licenses and permits.
After death and once it is established that a testamentary instrument may legally transfer ownership, the next step will be to determine whether the beneficiary may take ownership. The laws governing the transfer of assets by a decedent are those of the decedent’s domicile prior to death. But the law of the beneficiary’s domicile will apply to determine whether or not he or she may take possession.
Successful cannabis entrepreneurs need to keep in mind that even illegal property has a value. The IRS has held that the fact that a market is illicit does not obviate the existence of that market for estate tax valuation purposes. (Browning v. Commissioner.)
Each state’s procedures to transfer ownership of a license are different, but the goal is the same: to ensure that the transferee is qualified to hold a license. For estate planners, understanding these rules is critical to ensure that a license holder has a viable business succession plan in place. At the death of a client, the laws governing the transfer of assets by a decedent are those of the decedent’s domicile prior to death. But the law of the beneficiary’s domicile will apply to determine whether or not he or she may take possession.
How a cannabis-related asset will be delivered to a beneficiary by a fiduciary needs to be carefully considered. As a Schedule I drug, using the U.S. Postal Service is a federal crime, punishable by monetary fines and imprisonment. So, the traditional delivery by mail of an asset to a beneficiary is yet another challenge for the fiduciary. (18 U.S.C. Section 1716.)
Where a business is an asset of the estate, whether the new applicant is the fiduciary or the beneficiary (if that can even be established immediately following the death of a license holder), a new license may need to be applied for and issued before the fiduciary or the beneficiary can legally stand in the shoes of the decedent. In light of these strict rules, it may be a good practice to put in place a well-thought-out business succession plan.
If a fiduciary agrees to serve and is qualified to do so, he or she must then determine whether the estate, any trusts, and individually named beneficiaries are eligible to own licenses under applicable state laws. Both Washington and Oregon impose age, residency, and criminal history requirements on license ownership. (Rev. Code of Wash. Section 69.50.331; Ore. Admin. Rule No. 845-025-1115.) It is unclear how those requirements will be interpreted if a trust or an estate becomes the owner of a license. The fiduciary will need to work with the state or local licensing authority to determine whether a trust or an estate is eligible for a license.
Federal Income and Estate Tax Considerations
Few cannabis business deductions are allowed on federal tax returns, and the gross revenue is taxable. In some instances, the cost of goods sold (costs incurred for the purchase, conversion, materials, labor, and allocated overhead incurred in bringing the marijuana inventories to their present location and condition) may be deductible under I.R.C. Section 280E, but the ordinary and necessary expenses related to sale are not.
The Ogden Memo
When states began legalizing marijuana, the Department of Justice (DOJ) made it clear that it intended to pursue any commercial enterprise selling or producing cannabis. On Oct. 19, 2009, Deputy Attorney General David W. Ogden (under Attorney General Eric Holder) issued a memorandum known as the “Ogden Memo” confirming that the DOJ remained “committed to the enforcement of the [CSA] in all States.” However, given the DOJ’s limited “investigative and prosecutorial resources,” the Ogden Memo advised U.S. Attorneys to focus on prosecuting “significant marijuana traffickers” and not on those whose actions are in “clear and unambiguous compliance with existing state laws providing for the medical use of marijuana.”
Ogden’s successor, DOJ Deputy Attorney General James Cole, issued a memorandum (Cole I) expressing the DOJ’s position that the Ogden Memo was never intended to shield from federal enforcement action and prosecution marijuana-related cultivation and distribution for medical use or lower-level marijuana-related crimes already being prosecuted by state laws. A subsequent memo issued in August 2013, known as “Cole II” expanded on Cole I. It emphasizes that the federal government will not pursue legal challenges in jurisdictions that authorize marijuana use, assuming those state and local governments maintain strict regulatory and enforcement controls on marijuana cultivation, distribution, sale, and possession that limit the risks to “public safety, public health, and other law enforcement interests.”
But Cole II instructs federal prosecutors to prioritize their “limited investigative and prosecutorial resources to address the most significant [cannabis-related] threats.” Those threats include: (1) distribution to children; (2) use of revenue to further other criminal enterprises; (3) diverting cannabis from states that have legalized its possession to states that prohibit it; (4) using authorized cannabis activity as a pretext for the trafficking of other illegal drugs; (5) using firearms or violent behavior in the cultivation and distribution of cannabis; (6) exacerbating public health and safety risks due to cannabis use, including driving while under the influence of cannabis; (7) growing cannabis on public land; and (8) possessing or using cannabis on federal property.
TREASURY DEPARTMENT GUIDANCE
In addition to the guidance issued by the DOJ, the Financial Crimes Enforcement Network (FinCEN), a division of the Treasury Department, issued its own guidance in 2014 to clarify Bank Secrecy Act expectations for financial institutions seeking to provide services to cannabis-related businesses in light of state initiatives to legalize certain cannabis-related activity. The guidance, while intended to help the industry, requires expensive and onerous paperwork from financial institutions about such customers under its anti-money-laundering regulations.
The FinCEN guidance points out that the decision to open, close, or refuse any particular account or relationship should be made by each financial institution based on a number of factors specific to that institution. These factors may include its particular business objectives, an evaluation of the risks associated with offering a particular product or service, and its capacity to manage those risks effectively. In addition, under the FinCEN guidance, a financial institution that decides to provide financial services to a cannabis-related business would be required to file a Suspicious Activity Report if the financial institution knows, suspects, or has reason to suspect that a transaction involves funds derived from a cannabis-related business.
In spite of the many federal roadblocks, the sale and use of recreational cannabis first became legal after voters approved an amendment to the Colorado Constitution in the November 2012 elections. Many states had legalized small amounts of medical cannabis before 2012, starting with California in 1996, and many have legalized both recreational and medical use since then. While each state’s laws differ, generally they limit possession, use, and ownership of retail licenses based on age, residency, and criminal history. The following is a summary of the laws currently in effect in California and Washington, where both medical and recreational marijuana are legal.
Medical Marijuana. California adopted Proposition 215, the Compassionate Use Act of 1996 (CUA), which provided that seriously ill Californians had the right to obtain and use marijuana for medical purposes. (Cal. Health & Safety Code (Calif. HSC) Section 11362.5) With the passage of the CUA, patients and primary caregivers did not risk criminal prosecution (under California law) for obtaining and using marijuana upon the approval of a California-licensed physician. (Calif. HSC Section 11362.5(d).)
California’s medical marijuana law was expanded by SB 420, the Medical Marijuana Protection Act (MMPA), on Jan. 1, 2004. (Calif. HSC Sections 11362.7-11362.7.83.) Among other things, the MMPA defined who is a qualified patient, primary caregiver, or attending physician, and what constitutes a serious medical condition for which marijuana may be used. (Calif. HSC Section 11362.7.) It also authorized patient organized “cooperatives” or “collectives” to grow, distribute, and/or sell medical marijuana on a nonprofit basis to their members. It allows designated primary caregivers to charge for their labor and services in providing marijuana. (Calif. HSC Section 11362.71.)
In 2015 California’s legislature enacted a licensing and regulatory system for medical marijuana businesses, the Medical Cannabis Regulation and Safety Act (MCRSA), which took effect Jan. 1, 2016. It established permitting for marijuana cultivation and dispensaries. Under MCRSA, qualified patients can cultivate up to 100 square feet for personal medical use, and primary caregivers with five or fewer patients are allowed up to 500 square feet. As under SB 420, local governments may further restrict or even ban the cultivation of medical cannabis. MCRSA provided for the sale of retail medical marijuana beginning in 2018.
Recreational Use and Retail Sale of Marijuana. In 2016, California passed Proposition 64, known as the Control, Regulate and Tax Adult Use of Marijuana Act (AUMA). AUMA paved the way for the implementation of a system to regulate, tax, and treat recreational marijuana by adults over age 21 similar to the system for alcohol. Retail recreational marijuana became available beginning Jan. 1, 2018. And adults may possess, gift, cultivate, and transport limited amounts within the state.
Commercial Licenses. On June 27, 2017, Governor Jerry Brown approved Senate Bill 94, entitled the Medical and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA). This legislation joined the medical and recreational systems. By doing so, the more industry-friendly rules of the recreational sector, such as allowing applicants to obtain licenses in different phases of the industry—cultivation, manufacture, distribution, and retailing—could apply to the medical sector. It eliminated the restriction on vertical integration.
Enforcement. Marijuana may not be smoked where tobacco is prohibited (except within a private residence). And employers may continue to prohibit marijuana use by their employees, whether medical or recreational.
Taxes. Beginning Jan. 1, 2018, California imposed two new taxes on cannabis, both an excise tax on purchasers and a tax on the cultivation of cannabis that enters the commercial market.
Medical Marijuana. On Nov. 3, 1998, Washington voters approved Ballot Initiative 692, making small amounts of cannabis legal for medical purposes. The Washington Supreme Court ruled in 2010 that “I 692 did not legalize marijuana, but rather provided an authorized user with an affirmative defense if the user shows compliance with the requirements for medical marijuana possession.”
In 2015, SB 5052 brought medical cannabis under the system and rules of I-502 (discussed below). In 2017, the Washington legislature closed a gap in the law caused by the merger of the two systems. Medical cannabis patients could grow cannabis for personal use, but had no legal pathway to acquire plants. Engrossed Substitute SB 5131 (ESSB 5131) effective July 23, 2017, allows qualifying patients and their designated caregivers to purchase plants and cultivate plants for personal use, and join state-registered medical cannabis cooperatives to grow cannabis with up to four other patients. Those who hold a recognition card issued by the state are able to grow and purchase larger quantities.
Recreational Use and Retail Sale of Marijuana. In 2012, Washington voters approved Ballot Initiative 502 (I-502), an initiative amending state law to provide that the possession of small amounts of cannabis by individuals over the age of 21 is not a violation of Washington law. In addition, the initiative provided that the “possession, delivery, distribution, and sale” by a validly licensed producer, processor, or retailer, in accordance with the regulatory scheme administered by the Washington State Liquor and Cannabis Board (WSLCB), are not criminal or civil offenses under Washington State law. Nevertheless, an employer is under no obligation to accommodate the medical use of cannabis by an employee.
Enforcement. I-502 legalized marijuana use for adults; however, there are still a number of restrictions, the violation of which may be subject to strict penalties:
- Possession of marijuana in amounts above specified legal limits remains criminal. Growing or selling marijuana without a license from the state remains criminal, except for qualifying patients or designated providers who grow or possess marijuana in accordance with the applicable provisions of Rev. Code of Wash. Chapter 69.51A.
- Public consumption is illegal.
- Rev. Code of Wash. Section 46.61.502 provides a standard for driving under the influence of marijuana. Laws similar to those applicable to driving under the influence of alcohol apply.
Commercial Licenses. I-502 established a three-tier production, processing, and retail licensing system that permits the state to retain regulatory control over the commercial life cycle of cannabis. As with alcohol after Prohibition, those in the cannabis industry are barred from complete vertical integration.
The WSLCB adopted detailed rules for implementing the initiative, including cannabis license qualifications and an application process, application fees, cannabis packaging and labeling restrictions, recordkeeping and security requirements for cannabis facilities, reasonable time, place, and manner advertising restrictions, and taxation.
Washington also strictly governs the operation of a business of a deceased or incapacitated license holder by requiring the executor, administrator or trustee to qualify as a licensee under the laws that apply to any other applicant. (Wash. Admin. Code 314-55-140.)
Taxes. The recreational use of cannabis is regulated and taxed in a manner similar to alcohol, although at a significantly higher rate. (Rev. Code of Wash. Chapter 69.50.) Washington requires retail licensees to collect a 37 percent excise tax. (Rev. Code of Wash. Section 69.50.535; Wash. Admin. Code 314-55-089.) In addition, Washington’s business and occupation tax and sales tax apply.
It is critical for investors, producers, processors, retailers, and other stakeholders within the legal cannabis industry to understand how to comply with the quickly changing legal landscape. This presents obvious ethical challenges for lawyers seeking to represent the interests of cannabis industry members or fiduciaries who must administer property derived from the cannabis industry. A lawyer must consider whether he or she may ethically advise and assist a client seeking to engage in conduct that the lawyer knows is criminal under federal law or in one or more states.
Most states have adopted American Bar Association Model Rule of Professional Conduct 1.2 that prohibits assisting a client in the violation of law:
“A lawyer shall not counsel a client to engage, or assist a client, in conduct that the lawyer knows is criminal or fraudulent, but a lawyer may discuss the legal consequences of any proposed course of conduct with a client and may counsel or assist a client to make a good faith effort to determine the validity, scope, meaning or application of the law.”
Several state bar associations have issued guidance as to whether an attorney may assist clients with complying with state medical and recreational cannabis laws that conflict with the CSA. Most states that have considered the issue have concluded that the attorney does not run afoul of state ethical rules. But, many of the opinions are limited to medical and not recreational marijuana.
For example, the Illinois Rules of Professional Conduct permit lawyers to counsel clients on activities permitted in Illinois that may violate federal law, so long as the lawyer counsels the client on the potential consequences:
“A lawyer shall not counsel a client to engage, or assist a client, in conduct that the lawyer knows is criminal or fraudulent, but a lawyer may
(1) discuss the legal consequences of any proposed course of conduct with a client,
(2) counsel or assist a client to make a good-faith effort to determine the validity, scope, meaning or application of the law, and
(3) counsel or assist a client in conduct expressly permitted by Illinois law that may violate or conflict with federal or other law, as long as the lawyer advises the client about that federal or other law and its potential consequences.” (Ill. Rules of Professional Conduct 1.2(d)(3).
New York has only opined on the ethics concerning medical marijuana-related advice. New York’s State Bar issued an ethics opinion concluding:
“As Rule 1.2(d) makes clear, although a lawyer may not encourage a client to violate the law or assist a client in doing so, a lawyer may advise a client about the reach of the law. . . . . Thus, a lawyer may give advice about whether undertaking to manufacture, transport, sell, prescribe or use marijuana in accordance with the CCA’s regulatory scheme would violate federal narcotics law. If the lawyer were to conclude competently and in good faith that the federal law was inapplicable or invalid, the lawyer could so advise the client and would not be subject to discipline even if the lawyer’s advice later proved incorrect.” (N.Y. Comm. on Prof’l Ethics Op. 1024 (2014) (brackets and ellipsis in original).)
California does not follow the Model Rules when examining the extent to which an attorney must avoid advising clients on matters that may be illegal on a local, state, or federal level. California Rule of Professional Conduct 3-210 provides: “A member shall not advise the violation of any law, rule, or ruling of a tribunal unless the member believes in good faith that such law, rule, or ruling is invalid. A member may take appropriate steps in good faith to test the validity of any law, rule, or ruling of a tribunal.”
California’s standing Committee on Professional Responsibility and Conduct has not issued an opinion on the issue of whether an attorney may ethically advise clients on the possession, use, cultivation, or sale of marijuana under California law. But the Bar Association of San Francisco (SFBA) and the Los Angeles County Bar Association (LACBA) have. Both opinions concluded that an attorney may ethically advise a client on how to comply with California law in regard to the use, cultivation, or operation of a dispensary of medicinal marijuana, but may not advise the client to violate federal law and must advise the client that the conduct may violate the federal CSA. (LACBA, Comm. on Prof’l Responsibility & Ethics, Formal Op. 527, at 9 (2015); SFBA, Formal Op. 2015-1, at 2-3.) The opinions do not deal with recreational marijuana. And, the State Bar of California is yet to issue its own opinion.
Regardless of state law, attorneys need to keep in mind that federal law continues to make illegal certain financial transactions connected to unlawful activity, including transferring monetary instruments or funds with the intent to promote the carrying on of specified unlawful activity, including the manufacture, importation, sale, or distribution of a controlled substance. (Money Laundering Control Act of 1986, 18 U.S.C. Sections 1956, 1957.) Most attorney malpractice policies exclude coverage for criminal acts. If a lawyer is sued for malpractice on a marijuana-related issue, an insurance carrier may deny coverage based on the criminal acts exclusion. And to compound matters, fees derived from marijuana businesses, including fees for advising a marijuana business, may be subject to forfeiture under federal law as coming from an illegal source.
Many open issues concerning cannabis remain unanswered:
- Does cannabis cultivation or production on even a portion of land used as collateral constitute an event of default?
- Might it jeopardize the status of farm and ranch land subject to a conservation easement?
- Does the conservation easement holder have a duty to enforce the terms of the easement?
- If it doesn’t, does it jeopardize its ability to hold conservation easements or, worse, its nonprofit status?
- Could an attorney who counsels clients in the cannabis industry be found to have engaged in a criminal conspiracy for federal law purposes?
- Is an attorney who counsels clients in the cannabis industry at risk of being disbarred from practice in federal courts or before federal agencies, even if the attorney’s state of admission is not concerned about the work?
- Does an attorney’s advice to clients in the cannabis industry trigger the crime/fraud exception to attorney client privilege for federal law purposes?
While the majority of states (and the District of Columbia) have legalized cannabis in some form, cannabis use, possession, production, distribution, and marketing remain illegal under federal law. The Cole memoranda, which are only policy statements, suggest that the federal government is uninterested in overturning state laws legalizing cannabis or prosecuting individuals and businesses unless their conduct implicates one of the listed enforcement priorities. However, the DOJ policy is evolving, provides little protection upon which one can unquestionably rely, and can change in an instant. Therefore, cannabis users and businesses remain at risk of civil and criminal prosecution by the DOJ. Whether legal or not, individuals with a business interest related to cannabis must consider how this asset is to be handled in their estate, and lawyers need to be prepared.
This column does not necessarily reflect the opinion of The Bureau of National Affairs, Inc. or its owners.
Wendy S. Goffe is a partner with the law firm of Stoel Rives LLP, Seattle, Washington, with more than 25 years of experience counseling clients on estate planning issues. She is a fellow of the American College of Trust and Estate Counsel (ACTEC) and a member of the ACTEC Digital Property Committee. Her experience includes advising clients on matters including probate and trust administration, estate and gift taxation, charitable giving and nonprofit trusts and corporations, family-owned business succession and issues concerning unmarried couples.