Tax Lawyer Blog

A Blog written by the Tax Attorneys for Individuals and Businesses

Who Can Bring Forth a Challenge

Following Richard Pratt’s death in 2009, Madison Ashton claimed that she had left her profession as a sex worker to become the Australian billionaire’s kept mistress. Pratt had apparently promised the former Penthouse Pet a $500,000 per year allowance, $36,000 per year for accommodation, $30,000 per year for travel expenses, and a $5 million trust fund for her two children. The court rejected Ashton’s claim, ruling that although that conversation may have happened, Pratt clearly had no intention of entering a legally binding agreement.

However, Shari-Lea Hitchcock, another of Pratt’s mistresses with whom he had a daughter, managed to reach a $100 million dollar settlement through her will contest. The bulk of Pratt’s money went to the children he had with his wife Jeanne.

Will contests can be difficult to win, and can only be brought by certain parties. In the next three posts, we will discuss who may challenge your estate plan, what they must prove to be successful, and a few safeguards to minimize the chances that a will contest will become part of your legacy.

Who can challenge a will?

Not everyone has legal standing to contest a will. A lawsuit to challenge the validity of a trust or will may only be filed by an “interested party,” meaning a person or entity that would be personally (and financially) affected by the document being probated or administered. These people/entities typically include:

  • The decedent’s heirs-at-law. These are the people who would have inherited by law if the decedent had no will, including the decedent’s spouse/civil partner, children, and if no spouse or children, the list expands to include parents, then siblings, then other relatives.
  • The decedent’s previous beneficiaries. If the decedent left money or property to a specific individual or organization (e.g., charity) in a previous will or trust, those prior beneficiaries have standing to contest a more recent document.
  • Fiduciaries named in a prior will or trust. Named executors of a previous will, and trustees of a previous version of a revocable living trust, may also have standing since they stood to gain from fiduciary fees associated with the management and distribution of the estate.

Even if a person does have standing, they must convince the court that the will or trust should be declared invalid. In our next post in this series, we will review the grounds for contesting a will.

Trimmigrants, Trades and Taxes

For decades, a subculture of migrant workers have flooded California counties every year to make good money trimming marijuana plants. Known as “trimmigrants,” these individuals have made as much as $500/day and up to $15,000 in cash and/or product during the fall harvest — and we would be surprised if any of them ever paid taxes on that income.

With cannabis legalization, the trimmigrant heyday is coming to an end. Aside from the growing market availability of automated trimming machines which are threatening to make manual trimming obsolete, marijuana regulation is putting an end to the ability of the now state-legal cannabusinesses to hire and pay people under the table.

Trimmers are now being paid through salaries or issued 1099’s, and are expected to pay their fair share of taxes – both on their cash income and on any product they receive as compensation. If a trimmer does not provide their tax identification number to their employer, backup holding may also apply.

Taxation of bartered income

The exchange of products and/or services, otherwise known as “barter,” may take place informally between individuals or businesses, or through a third party barter exchange company. For tax purposes, the services or property exchanged must be valued in advance by the parties involved – this is usually the fair market value unless shown to be otherwise.

The fair market value of the service or product received as barter must be included in the taxpayer’s gross income for the year it was received, and is reported on Form 1040, Schedule C. In barters involving a third party barter exchange company, the company is required to issue a Form 1099-B, Proceeds from Broker and Barter Exchange Transactions, to their clients and to the IRS, unless it engages in less than 100 transactions per year, the exchange was made with certain exempt foreign persons, or the exchange involved property or services valued at less than $1 (see IRS Publication 525, Taxable and Nontaxable Income).

All others who exchange services and products (including marijuana growers and trimmers) generally need to file a Form 1099-MISC.

Tax lawyers for the marijuana industry

The attorneys and accountants who comprise the Cannabis Law Group at Moskowitz, LLP are committed to the needs of the evolving cannabis industry. For help with all your marijuana taxation issues, contact our San Francisco offices today.