Estate Planning, Trusts, Wills and Inheritance in Puerto Rico
Ricardo Muñiz, one of our firm's founding members, heads our estate planning, trusts and wills and inheritance practice. Because of the rules discussed below and our expertise in these fields, Adsuar Muñiz Goyco Seda & Pérez-Ochoa is the "go to" firm for estate planning, trusts, wills and inheritances by high-net-worth individuals in Puerto Rico.
Estate Taxes
If you were born in Puerto Rico ("PR"), you pass away while domiciled in PR, and if all your assets are "located in PR" and not "located within the US", your estate (i.e., your heirs) will not pay United States ("US") or PR estate taxes (i.e., death taxes). This also applies to a person born outside PR that acquired his or her US citizenship "solely" by residence in PR. However, if any of these PR residents owns assets "located outside PR," or assets "located within the US," their estates will most likely be subject to PR and/or US estate taxes.
If you were not born in PR, and did not acquire your US citizenship solely as a result of your residence in PR, you will be subject to US estate tax if the fair market value of your assets exceeds the then applicable US estate tax exemption amount. For these PR residents, the location of their assets is generally irrelevant.
For a more detailed discussion of these rules, see the Adsuar Muñiz Goyco Seda & Pérez-Ochoa, Puerto Rico Business Law Notes article titled "US and PR Estate Taxes on Puerto Rico Residents (2010 Update)."
Inheritance Rules
PR has forced heirship rules. This means that if you are domiciled in PR, you do not have much discretion on how, or to whom, most of your estate will be distributed upon your demise. In the absence of a will, if you have children, they are entitled to all of your estate; and if married, the surviving is only entitled to the widow's right of dower (i.e., a life interest or usufruct over a portion of the estate) and 50% of the "community property assets," if any.
The PR forced inheritance rules also apply to PR real property owned by non residents of PR. These non residents are often surprised to learn that PR's inheritance and estate tax rules differ markedly from those applicable in other states of the US, and that they should make special provisions for their PR real estate.
A comprehensive estate plan, and properly drafted trusts and wills, secure the economic wellbeing of your surviving spouse and descendants, provides for an orderly administration and division of your estate, avoids conflicts among heirs, provides for the special needs of minors or some other heirs, and eliminates or reduces your US and PR estate tax exposure.
Probate of Wills, Declaration of Heirs and Estate Tax Returns
Estate planning concludes with the handling of estate matters after your demise. In addition, to facilitating and expediting this process, significant tax savings may be achieved by properly considering applicable provisions of law and electing the various options available when preparing the US and PR estate tax returns, and upon the distribution of assets among your heirs.
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Estate planning that considers the interaction of US and PR estate taxes, and PR's inheritance laws, is not simple, especially for PR residents that have assets outside PR and those that were not born in PR. The assistance and advice of attorneys who have in-depth knowledge and experience with the applicable PR and US laws is invaluable to ensure the protection of your hard earned assets, for the benefit of your surviving spouse and other family members.
Ricardo Muñiz, head of our estate planning and tax practices has been preparing estate plans, wills, trusts, and overall tax planning for nearly 30 years. In addition to the insight derived from years of practice, Mr. Muñiz holds a Master of Laws in Taxation from New York University, is a former assistant Secretary of the PR Treasury for Internal Revenue, and is recognized as Puerto Rico's leading authority on estate planning, wills and trusts.
If you have questions about estate planning, wills, trusts, inheritances or taxes in general, the attorneys of Adsuar Muñiz Goyco Seda & Perez-Ochoa, P.S.C. can help. Contact us.
