Estate Planning for Cannabis Business Owners: An Introduction

Abstract

As more states legalize cannabis sales, estate planners may increasingly be called upon to advise clients with interests in cannabis-related businesses. This essay seeks assist estate planners in two ways. First, it aims to raise general awareness of cannabis business owners’ unique concerns. Second, the essay provides an overview of some of the fundamental issues about which cannabis business owners are likely to seek estate planning advice: business formation matters, wealth transfers, the ability of trusts to own cannabis-related businesses, and gift, estate, and income tax considerations.

In most states that permit legal cannabis sales, there is limited (or no) guidance to provide answers to many basic questions about wealth transfers involving cannabis businesses. At the federal level, while there is a clear prohibition on income tax deductions by cannabis businesses, the gift and estate tax rules are entirely silent on the most basic matters. With this introductory information, forward-thinking estate planners may be better equipped to advise clients about how much is still unknown about the legal landscape for cannabis business owners and to follow future developments in this burgeoning area of law.

Keywords: cannabis, tax, estate plan, deduction, gift, estate, 280E

JEL Classification: K1