How Investors will be Making Money off Massachusetts Medical Marijuana

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On May 8, 2013, Massachusetts state public health officials approved a set of regulations for the use and distribution of medical marijuana in the state.  In November 2012, Massachusetts voters approved a ballot initiative to allow the medical use of marijuana for "debilitating medical conditions", such as HIV, AIDS, Parkinson's disease, and multiple sclerosis.  Massachusetts is the 19th state (including the District of Columbia) to allow the distribution and use of medical marijuana.   

Up to 35 dispensaries will be open throughout the state.  Communities throughout the state are scrambling to modify zoning regulations to accommodate or even limit where a dispensary may be placed.  For example, Here is a link to what Pittsfield and Stockbridge are currently doing with their zoning laws.

Potential investors are wondering how to cash in on the inevitable market that will soon open up in Massachusetts surrounding medical marijuana.  The medical marijuana market in Massachusetts will no doubt be a multi-million dollar industry. Patients may receive up to a 60-day supply of marijuana, which the regulations defines as 10 ounces--a little over 1/2 a pound.  However, some patients may be allowed more with permission from their doctors.

Investors wondering how to become licensed to sell medical marijuana should be intimately familiar with the regulations.  The following is a break down of some of the regulations, not all.  This blog post does not constitute legal advice.  You are advised to speak with an attorney before acting on any information contained in this blog.

Registered Marijuana Dispensary

A registered marijuana dispensary (hereinafter "RMD") is a non-profit entity that acquires, cultivates, possesses, or sells medical marijuana. In order to sell medical marijuana in Massachusetts, an entity must be a RMD.

How to apply:

The following is a list of some of the requirements an RMD, all executives, directors, employees and volunteers must have:

• Be over 21 years of age;
• Have not been convicted of a felony drug offense in Massachusetts, or similar violation in another state, or U.S. territory;
• Submit a CORI Report from the past 30-days prior to application;
• All dispensary agents must have valid registration cards that were issued by the state;
• The entity must show proof that is has at least $500,000 at its disposal in bank accounts or lines of credit;
• a non-refundable application fee; and
• Various other requirements of the regulations.

After submission of the above information, state officials will then determine if your application can move into Phase 2 of the process.  Phase 2 requires much more detail than Phase 1 and a company would be wise to have an attorney assist with Phase 2.  Although, a company or potential company, may also want to consult with an attorney before any steps are taken before applying to become a RMD.

State officials will "score" the application based up certain criteria. Obviously, a RMD with a higher "score" has a better chance at obtaining a license.

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General requirements of a RMD:

Once a company is qualified to be a RMD, certain additional requirements must be met. The following is a list of some of those requirements:

• The non-profit company must be a corporation in good standing with the Massachusetts Secretary of State;
• Vaporizers must be available for sale to qualifying patients;
• a RMD cannot have more than two locations, but only one location can be dispense marijuana and other limitations must also be met with regard to the two locations;
• RMD must have a program for reduced costs or fees for for patients for financial hardships;
• Obtain a "certificate of registration"; and
• various other requirements such as security systems and storage facilities.

How Can One Make Profit if a RMD is a Non-Profit Company?

Since a RMD must be established as a non-profit corporation, a company and its directors or employees, may not expect to have significant financial compensation from running such a business.  However, one may be surprised that directors, executives, and some employees of certain non-profit companies have been known to receive substantial compensation for their work due to the demands and/or expertise of the work. 

Additionally, opportunities may exist in leasing land to an RMD.  There is a provision in the regulations that allows for an RMD to lease land, rather than having to purchase land. Various types of leases should be examined in order to fully maximize the profit potential of such a lease.

If you or your company want to explore the possibility of applying to become an RMD to dispense, grow, and sell medical marijuana in Massachusetts, or if you are looking to lease land to a RMD, an attorney may be able to help further explain and assist in the intensive application and regulation process

Here is a breakdown of some the regulations put out by the Massachusetts Dept. of Public Health.

By: Attorney Geoffrey Farrington

www.Bohnet-Romani.com
Twitter: @FarringtonLAW

Am I Entitled to my Ex-spouse's Inheritance?

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In Massachusetts, a divorce court attempts to distribute the marital estate in a fair manner.  What if your soon-to-be ex-spouse's parents are very wealthy and plan on giving most of it to your spouse when they pass away?  Can you expect a piece of the inheritance during the divorce process?  The short answer is. . . . no.  However, there is a way to let the judge know your spouse's future opportunity to acquire assets will be significantly greater than yours due to the expected inheritance.  A document called a Vaughan affidavit can greatly assist a party whose ex-spouse is in-line to inherit the family fortune.

Hypothetical Situation

Let's assume that Husband and Wife have been married for 15 years, they do not have kids, and they each hold middle income jobs.  Wife files for a divorce in Massachusetts.  Wife's parents, who are retired, were the owners of several successful chain restaurants and have an estimated net worth of $2.3 million.  The Wife's parents have dome some estate planning and will leave all of their assets to Wife when they pass away.

Husband wants a portion of Wife's expected inheritance as part of the divorce settlement.  He is  

Vaughan Affidavit

 Massachusetts law does not allow for Husband to take part of the expected inheritance during a divorce proceeding.  Even though Wife's parents have a net worth estimated at $2.3 million, it is not guaranteed that the Wife will inherit a single penny.  There are numerous reasons that could reduce or eliminate the Wife's parents' assets.  For example, the stock market might crash, the vacation home might go up in flames and not be covered by insurance, there may be significant future medical bills, there may be significant back taxes, the parents might change their minds and not leave anything to Wife etc.  Therefore, divorce courts do not divide a spouse's possible inheritance during a divorce.

However, Mass. General Laws ch. 208, § 34 requires a court, when determining alimony and an equitable division of the martial estate, to consider certain factors, including a party's "opportunity for future acquisition of capital assets and income."  Thus, if a party is going to inherit a significant amount of money or assets, that party will have a good opportunity to acquire future assets, a factor the judge should know about.

To find out how good of an opportunity a spouse will have at acquiring future assets, a party, through counsel, should request a Vaughan affidavit from the soon-to-be ex-spouse's parents.  The Vaughan affidavit was named after a Massachusetts divorce case decided in 1991.  The Vaughan affidavit is unique to Massachusetts divorce law.  It provides a way for a spouse's parents to give a general description of their assets and potential inheritance to spouse.  The affidavit strikes a balance between the spouse's parent's privacy interests and a divorcing party's need to discovery important information that might affect a divorce settlement.  If a spouse's parents give a sufficient Vaughan affidavit, it eliminates the need for invasive prodding into their financial information.

Closing Thoughts

It is important to note that the Vaughan affidavit technique applies only in Massachusetts.  If the spouse's parents reside outside of Massachusetts, the Vaughan affidavit may not have any legal significance. Other methods, such as requesting estate planning documents or sending out subpoenas for such documents, may be appropriate.

If the spouse's parent refuse to give the Vaughan affidavit, there are techniques that counsel may use to discovery the information.

Legal counsel should ask for a Vaughan affidavit if the circumstances suggest that a spouse will be receiving significant inheritance.  Real world warning: if one requests a Vaughan affidavit from a spouse's parents, one must warn their own parents to expect to receive a Vaughan affidavit request themselves.  One might prepare their parents for this possibility--an awkward conversation for some. Many do not talk with their parents about estate planning until they are forced to do so by a Vaughan affidavit request.

Although the Vaughan affidavit may appear to be a small portion of a divorce case, for some, it can have a significant life-long impact.

By: Geoffrey R. Farrington, Esq.

www.Bohnet-Romani.com
Twitter: @FarringtonLAW