Cannabis Business Licenses & Secession Planning

Generally, upon the death of a person in the United States, that person is free to leave just about anything they want to their heirs through a will or use any property owned to create a trust – ranging from intellectual property to real estate, and including practically anything of great, little, or merely sentimental value.

However, that is not necessarily true with respect to a marijuana business license. As it turns out, most states limit what you can do with your license once it has been granted to you, including limiting your ability to transfer it or, in this case, leave it to your heirs after your death.

In Oregon, for example, it is impossible to pass a marijuana business license from one person or entity to another by a will. Oregon law provides that a marijuana business license is considered a privilege that is attached to a particular person, expires upon death of the licensee, and does not descend either by will or intestacy – no matter what.

Washington State, on the other hand, is a little more lenient. If a marijuana licensee dies or is incapacitated, that person’s appointed guardian or the executor of the deceased’s estate must notify the Washington State Liquor and Cannabis Board (WSLCB). The WSLCB must then provide written approval before the surviving heir can continue operating under that license. The WSLCB’s policy is to provide this permission so long as two conditions are met: (i) the individual resuming business under the license is a resident of Washington State, and (ii) the individual resuming business under the license passes a criminal background check.

If the surviving heir – the person to which you bequeathed the license in your will – is not a Washington resident, does not pass the background check, or fails some other requirement (for example, he or she is still a minor), the license will simply expire (or, “lapse” in legalese). If this occurs, the entire business may be at risk because, without a valid license, the business cannot legally operate. Should the surviving heir operate the business without WSLCB permission, the state regulatory authority can step in and assess monetary fines, close the doors to the business, or even destroy the inventory of an unlicensed business.

That your license will lapse if there is not a qualified successor to inherit it after your death is critical for cannabis business owners to know. Equally as important is to prepare a contingency plan to ensure that if whoever is set to inherent the business license is ineligible to do so, another qualified successor can step into his shoes. We have worked with numerous license holders who believed they would be able to pass their business on to their children through a will or trust, treating the marijuana license as a piece of personal property. However, this is a common misperception and, without specific, advanced preparation, as well as satisfaction of many nuanced state requirements, this bequest will probably not happen and instead the license will expire.

If the license is held by an individual person, or a group of individuals, in a state in which this post-death license devising is permitted, a valid will must be drafted that details the intended bequest. It is advisable to have more than one person in line to receive the bequest in case the intended recipient is deemed an ineligible person by the regulatory authority. Furthermore, if the license is held by a business entity (like an LLC) rather than a natural person, secession plans must exist in the corporate documents of the legal entity to be valid and enforceable.

As always, make sure you are familiar with the laws of your state, and contact an attorney if you have specific questions about secession planning for cannabis business licenses.

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