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Mar 07, 2012

Inheritance tax and law


The Global Property Guide looks at inheritance from two angles: taxation, and what inheritance laws apply to foreigners leaving property in Puerto Rico : what restrictions there are and whether making a will is advisable.

INHERITANCE TAX


How high is income tax on residents in Puerto Rico?


ESTATE TAX

Puerto Rico levies estate and gift taxes on the net taxable value of the property transferred at death or by gift at rates ranging from 18% to 50%.

Nonresidents are subject to estate tax only on property located in Puerto Rico. Residents are subject to estate tax on all their property.

The taxable estate is the gross estate value less debts of the decedent, funeral expenses, charitable bequests, and fixed exemption depending on citizenship status of the decedent:

  • US$30,000 for a nonresident US citizen
  • US$10,000 for a nonresident alien (non-US citizen)
  • US$400,000 for residents

INHERITANCE LAW


What inheritance laws apply in Puerto Rico?


Puerto Rico’s inheritance laws affect everyone who owns real estate in Puerto Rico

The main law regarding estate succession and real property rights is the Puerto Rico Civil Code. A foreign property owner is not treated differently, nor is any distinction made under Puerto Rico law between foreigners of different nationalities or religions.

The general principles governing jurisdiction over inherited property are:

  • Real property located in Puerto Rico is regulated by the laws of Puerto Rico. If the foreign law states that the applicable law for real property located in Puerto Rico is the law of the jurisdiction where the owner resides, such disposition is not valid under Puerto Rico law. The Registry of the Property for Puerto Rico will not register a real property transfer ordered by a foreign court without going through Puerto Rico courts.
  • Personal property (i.e., all property except real estate) is governed by the law of the jurisdiction where the deceased person resided or was domiciled. If the foreigner’s national law states that the applicable law is Puerto Rico law, the judge must apply Puerto Rico substantive law. Puerto Rico courts recognize foreign judicial decisions and if an inheritance process was handled by a foreign competent judge, then the decision regarding property ownership must be executed by a Puerto Rico court.

Inheritance issues in Puerto Rico are handled by a civil court which applies formal written procedures. Any court decisions rendered in the deceased’s last domicile outside Puerto Rico must pass through Puerto Rico courts for execution. This process can be long, even if there are no conflicting issues, and includes the request and issuance of an inheritance tax lien release issued by the Puerto Rico Treasury Department. All the property of the deceased located in Puerto Rico, real or personal, is subject to this tax lien created, by operation of law, immediately upon the person’s death. The estate tax lien release lifts the lien and allows the transfer or conveyance of the encumbered property.

An inheritance procedure without conflicting interests between the heirs may last from twelve to eighteen months.

Puerto Rico inheritance law includes forced heirship.

Puerto Rico laws grant rights of forced heirship to the children of the deceased. In the absence of children, or other descendants of such children, then to the parents of the deceased. In the absence of children, grandchildren or other direct descendants, the parents are considered forced heirs. Foreigners cannot avoid the rules of “forced heirship” concerning an estate consisting of real property located in Puerto Rico, because the inheritance of such property is regulated by the laws of Puerto Rico.

In inheritances concerning children and a will (testate successions) the forced heirs are entitled, in equal proportions, to one-third of the Puerto Rico Estate (the "legitimate portion"). Another third of the Puerto Rico Estate (the "betterment portion") is distributed in proportions determined by the testator in the will. The testator is free to bequeath the remaining third of the Puerto Rico Estate (the "free disposition portion"). In the absence of a specific testamentary disposition, however, the remaining third goes to the forced heirs. Thus, the forced heirs share equally in the Puerto Rico Estate, except to the extent any heirs are preferred through the will in the betterment or free disposition portions. In the absence of a will, the forced heirs inherit the entire estate in equal proportions.

In inheritances where there are no children, but either one or both parents of the deceased are alive, then the parents are forced heirs. If there is a will, the forced heirs are entitled, in equal proportions, to one-half of the Puerto Rico Estate (the "legitimate portion"). The testator is free to bequeath the other half of the Puerto Rico Estate (the "free disposition portion") as he/she desires. In the absence of a specific testamentary disposition, however, the remaining half goes to the forced heirs. In the absence of a will, the forced heirs inherit the entire estate in equal proportions.

The surving spouse of the testator also has benefits; under both testate and intestate succession, namely, a usufruct over a portion of the estate. The usufruct grants the surviving spouse the right to receive the income, rents and dividends derived from a portion of the estate.

In the absence of children, grandchildren or direct descendants of such grandchildren, then the estate goes to the parents of the deceased. In the absence of parents then the estate goes to the closest blood relatives (brothers and sisters, nephews and nieces). In the absence of these relatives, the estate goes to the spouse of the deceased. In the absence of a spouse, the estate goes to any other living relative. In the absence of all the aforesaid heirs, then the estate goes to the Commonwealth of Puerto Rico for the benefit of a “Fund for the University of Puerto Rico”.

It is uncommon for foreigners to write wills in Puerto Rico.

Even in instances where the foreigner owns real estate in Puerto Rico, he/she usually writes a will in the jurisdiction where he/she resides. Advice is normally obtained from a Puerto Rico lawyer to ensure a foreign will complies with Puerto Rico law in the disposition of real estate e.g. the will must obey the rules of forced heirship.

If a foreigner wants to make a local will, his/her presence in Puerto Rico is required, with the intervention of a notary public. The notary advises the testator of the legal formalities the will.

The Puerto Rico Civil Code also recognizes the validity of a holographic will executed in the handwriting of the testator. A holographic will can be written by a foreigner in his or her own language outside Puerto Rico. It must comply with the formalities and substantive laws in the Puerto Rico Civil Code.

If a person dies without a will, a lawyer in Puerto Rico must file an action in court to have the heirs of the deceased person declared as such. During the inheritance process in Puerto Rico, heirs will not be able to sell, convey or transfer the property located in Puerto Rico. Foreign heirs must present birth certificates (with all the legal formalities and legalizations needed to be effective in Puerto Rico), among other documents.

Gifts of property prior to death must take forced heirship into account.

Puerto Rico law prohibits the gift or donation of any property that deprives a forced heir of his/her rights to an estate (i.e., the legitimate or betterment portions).

Ownership of property in Puerto Rico is determined by registered rights.

Puerto Rico law looks at registered ownership and registered rights to determine the ownership of real property. Ownership rights of personal property are governed, generally, by the contracts which grant such rights.

The owner of the real estate is the person or persons registered in the Property Register of Puerto Rico. If the person is married but the spouse does not appear as joint owner in the register, then the registered owner may transfer, sell or give the land to anyone. If the spouse appears as the joint owner in the register, the presumption in Puerto Rico is that the property is community property and may be sold or conveyed only with the consent of the registered owners.

A guardian must be appointed to manage the inheritance of children.

If property (or part of it) is inherited by a minor, or children not of legal age, or others not deemed an adult for legal purposes, and such person is not under the guardianship of a parent, grandparent or a legally appointed guardian, then a guardian must be appointed to manage the property. A guardian may be appointed in the will to manage the property. In any event, the sale of the real estate where a minor has a participation must be authorized by a civil court in Puerto Rico and such court must be persuaded of the advisability of such sale and must approve how the proceeds of the minor’s participation in such real estate will be applied or disbursed.






Comments

#1 HILDA BEY-SEPULVEDA | March 17, 2010

I am a heir of a property in puerto Rico. My father was the owner. I was 14 years old when he died, my sister was 16 years old, and my brother 19 years old. There are another sons. they were more than 30 years old. Some of them died but had sons.My father had around twenty sons.What is the process to follow to do the Heirs'Declaratory, if he died in 1979?

#2 SANDRA TORRES | March 21, 2010

My parents left me and my 8 siblings a property that we would like to sell. My problem is the documentation. Apparently when my father purchased the property it was not registered and we are missing the compra-venta as well. What can we do?

#3 MADELINE RIVERA | March 26, 2010

I recently heard that Puerto Ricans need to reapply for a new birth certificate if they were born in P.R., Can you please tell me the procedure for reapplying?

#4 LARA EMMANUELLI | April 03, 2010

Hello and thank you for taking the time to answer my question.
If I inheret land in PR and I'am born and raise in PR do I have to pay taxes when the property sells?
If yeas how much? 45% to 50%?
Thank You

#5 ALICE DAPONTE | April 06, 2010

My father and step mother owned a house in PR and she passed away, they had no will, also never had children together, he now lives with me. Her sister (my father'sister-in-law) saids she is entitled to some of the sale of the house, what part $$ and who else? Thank You

#6 SUNSHINE | April 07, 2010

my father had two separate residence,one in ny and the other puerto rico. He had a will made up in puerto rico. He left the house in pr to my two sisters and the house in ny to my brother and I. since then,my brother passed away and my other sister in pr passed away. my deceased sister left a will but not sure what is in her will. how do I find out what is in her will? am I entitle to anything or the house that my father left to both sisters. The deed was never transfered and my fathers will never got probated in either pr nor ny. Please advise as to what I need to do. today I rec'd a letter from pr that my sisters will is going to be read,should I go or not? Thank You.

#7 NEED ADVICE | April 19, 2010

My father & mother past was that lived in Puerto Rico but I never saw the will for either of them. Now my sister has both houses and will not tell me anything. I need someone that can help me reclaim anything that may have been left to me. If you could please give me some advise. I am state side now & can't keep flying to Puerto Rico to get no were. Thank you

#8 DONDI | April 25, 2010

Father in Law has my wife as property owner of a house he lives.
Years later my wife's mother dies and Father remarries. Father now dies and second wife wants to stay. What are rights my wife property owner have? Can she force her out?

#9 ENEIDA DIAZ | April 27, 2010

I would like to know my father lives in puerto rico he has a land there and he built a house. I heard the land is registered but the house is not. my father is dying and he has a wife. his four kids live in Miami, Fl . I would like to know what will happen after my father passes away. how much taxes we would have to pay and does his wife get anything?

#10 JOTA HACHE | April 27, 2010

Kindly please inform, how do I proceed to buy an inherited piece of land in Puerto Rico from my 5 siblings? What legal documents should I use to protect from any illegal act? (Yes it happens, even between siblings)

#11 EVE | April 27, 2010

One parent died and the other has some dementia and making poor decisions. Would like to submit a declaration of heir to the court. What is the process? How can I connect with an attorney?

#12 BLANCA | April 27, 2010

hi good day. my issue is my grandparents [dads parents] own 2 houses on one property one in front of the other. my granddad passed in 1981 leaving my grandma,my grandma passes in 2005. my aunt sister to my dad who lives in puerto rico was in charge and control of da house expenses ect.when my granddad passed, my granma comes to n fro chicago n puerto rico.she passes in 2005, da sister in puerto rico [laly] wants to sell the houses, and she wants all da bors. n sis. to sign so she can sell da houses. but... all da sibilings in the u.s. want to know what she did with the monies that where incured since 1981 till present, to know what to do regarging on the sinitures .laly says she has documentation on all monies. what about the property taxes? if not paid what happens? can she sell with out anyone signing? 3 out of 10 sibilings have passed each leaving thier kids next of kin, do they have any part in this issue? can puerto rico sell the houses for taxes? do we pay for the taxes? please i need to know to have a meeting with the family i want to have facts on the table. do we have to hire a lawyer? please help. taina blanca. thank you for your time!!!!

#13 GLORIA | May 03, 2010

My father passed away and my mother is not legally married to him and is traveling to PR to sell his house with my younger sister even though I do not agree in selling the house they are going to go behind my back. Is this doable even though my mother is not legally married to my dad? I am wondering if there is any way I can stop this from taking place. I am the oldest of his daughters and do not want my mother to sell the house nor receive any of the assets that belonged to him.

#14 NICOLE | May 08, 2010

my dad lives in PR and i want him to get a "will". Could you tell me what the laws are considering heirs with out a will or with a will. should we do the will in PR or can i print one out in NY from the computer>

#15 JUAN COLLADO | May 10, 2010

Hi
We(brother & I) built a house on the land of my two aunts and father lives over the previous house which was owned/built by my father. The house was built and paid for in full. The land is registered but without the house. Do we need and acta for the house or other document?. We are the sole beneficiary's in both my aunt's and father will's.

#16 LUIS R RIVERA | May 15, 2010

My father and mother has joint account. Because he died, the bank frozed the account. According to the law we are entitle to 1/3 of 50% of the money, but we want to give it back to my mother. Do we have to pay taxes on the money and does my mother has to pay taxes again once she gets it back. My mother and sister lives in PR, me and my brother live US.

#17 JULIA | June 29, 2010

Can you please refer me to an eldercare lawyer in Aguadilla, Puerto Rico. I have gone through the American Bar Association here in NY with no results. I need a lawyer who is a familiar with Puerto Rican probate, civil and inheritance law. Any input will be most appreciated. Thank you.

#18 DIAN MORALES | July 01, 2010

can you please help me in this big question of mines?My dad past away and he had cancelled his will before he died. I am his only child. I cannot claim the house right at this time. How can I wait until I claim the house? Can the state take the house because its considered abandoned? Can somebody live in the house that is not me? and for how long before it can be theirs? Thank you very much

#19 DENISE | July 02, 2010

My father passed away 4 years ago. My father was remarried prior to attaining properties in PR and I have 3 siblings in PR from this union. There is one house in one location that is unoccupied and another house on a large property in which 2 of my siblings have built houses on as well. In summation 2 houses and the 2nd house my step mom resides in and 2 other houses my brother and sister built on his land. The land does not have my step moms name on it for some reason unbeknown to me. What are the current legal laws on dividing the 2 houses and land that is already built on?

#20 JACK MARIN | July 04, 2010

Assume I bought a house in Puerto Rico for $250,000 tomorrow and in a couple of years die. My sons (who live in NYC) are my heirs. What would be, if any the Puerto Rican Inheritance Taxes on that house?

#21 LELOPEZ | July 07, 2010

My father obtain a land by the goverment a he build the house, He passed away, frist and my stepmother then she didnt have any kids at all. who will heirs the property to? and how can I find out what I need to do to obtain rights for that property?

#22 CARLOS RODRIGUEZ JR | July 08, 2010

Hello my grandfather passed away 12 years ago and he own a large piece of land estimated 6,600 square feet in coamo puerto Rico . I would like to know how to claim the land since he died my father does not have any papers on it and he's to old to remember anything other than the name of the area . What do I have to do and who do I contact . Please contact me thank you .crodriguezstyle@aol.com thanks again

#23 RAFAEL FELIX | July 08, 2010

Hi,my father had power of attorney over my grandmothers real estate property in puerto rico. She died 20 months ago and before my father could claim the property he also died. I know of no other surving siblings. Do I as a grandchild have claim over the property and if so do I plan a trip right away to puerto rico to file a claim and where do I go? What documents do I need. Please contact me

#24 CHARLIE | July 09, 2010

My parents are of old age, They own land in PR where I had constructed a vacation home that is currently not registered since my parents continues to own the land in which the house was built on. I have been told that a will have been drafted in the event of their death leaving me with the portion where the house was made. What else would I have to do to protect myself of not losing my vacation house to other family members when the unexpected news comes that my parents passed away?

#25 ANGEL G | July 15, 2010

My father passed and did not leave a will. He left behind a car that we want to sell, what is the legal process for this? Get an affidavit? please advise

#26 ROSE | July 23, 2010

My grandmother passed away 4wks ago she owned land in puerto rico and in the 70's gave her older son permission to built a home on her land. He claims he legally owns it but my grandmother always maintained that she just gave permission to built on her land. How can I find out if she was still owner of the land.
Thank you

#27 ELVIS GONZALEZ | July 25, 2010

my mothers father owned lots of land in PR approx 260 acres of land my mom has a copyof deed but only her older siblings from earler marrage are noted on the deed.her father died when she was a little girl in the late 1930s and left her and her younger brothers to live with the older ones how can we find out if she is entitles to the land after so many years or if the land is still registed to the family. several years ago an older brother of my mom wanted her to sign a letter stating that she will turn over her portion so thgey can sell itvbut she didnt. i ask myself why if her name nor the names of the younger siblings are not on the deed why would they need permission to sell

#28 DELIA | July 27, 2010

My husband and I bought property in PR back in 2002. He has 2 grown children and I have 3 and they all live in the U.S. with our grandchildren. They all have their own families. If my husband were to pass away, and I wanted to return to the states, can I sell my property and leave or do I need permission from his kids. If so, what can we do to make it easier on all of us? Our kids have not put anything into our investment. I know if I need help in keeping up with the mortgage when he passes, none of them will help me either. Why is the spouse the last one to inherit his/her mates inheritance???? The children, grandchildren, parents, nieces, nephews, etc. come first than the spouse!!! This makes no sense!

#29 NANCY WONG | July 28, 2010

My uncle in Corozal, PR is asking for my signature along w/my 2 sisters to register the property in Corozal, PR. My father, Jose Ortiz passed away 3 yrs ago. We believe it's to sell the property. Can he do this without our signatures? Property is in Cibuco. My Dad had many siblings and there are few left in the area who are upset with my uncle who lives in Atlantic City. Please advise.

#30 MARIA | July 28, 2010

Good Day, My cousin passed away unexpectedly. We found out he owned a condo in Puerto Rico. My grandmother would have the inheritance but she suffers from dimmentia and in no condition to live there. I have power of attorney and would like to sell property. Can someone please direct me to an estate attorney?

#31 NANCY | August 07, 2010

My mothers parents owned land in Orocovis but they passed away. My mom also passed away but she has other brothers and sisters who are still alive. To be presice four are alive however they say that I cannot have what it pertains to me by my mother because they need to go by a process. My question is can I take my part that belongs to me in a simple process without conflict?

#32 STACEY G | August 09, 2010

My father passed away 2yrs.ago in lares,p.r.he left his house to all 6 of his children.I wanted to know how much % wise is the lawyer we have entitled to,if we are not using a realtor and we are just going through attorneys.we close for the final sale of the house on 08/16/2010,in san sebastian,p.r.I just really need to know what we have to pay & how much the lawyer's % should be.all his children live in the united states.I just don't want us to be taken advantage of.the house is gonna be sold for $120,000 and a deposit of $5,000 has already been made in may 2010.please help a.s.a.p. desperately seeking answers...muchas gracias

#33 EVELYN | August 11, 2010

My father lives in puerto rico and he his terminally ill, he has altimerz disease for about 10 years, he has property belonging to his father (his inheritance). His current wife (they have been married for over 30yrs) took him to a lawyer to sign a power of attorney while he was being treated for altimerz. My father is unable to speak, see, nor move. We just found out that his wife is in the middle of selling his inheritate property which should go to his children once he dies. We want to stop her from selling my fathers property What can we do? they expect his to die any time..please help

#34 LOURDES GARCIA | August 15, 2010

I inhereted a house in Puerto Rico and I live in Florida. If I sell the house do I have to pay taxes?
Thank You!

#35 RICK FLORES | August 21, 2010

Hi My Father had passed away about 5 years ago. He had property out in P.R. I would like to know what are the procedures on claiming the property?

Thank You

#36 MARITZA BURGOS | August 29, 2010

My father is bed ridden,Alzheimer.My mother is hiring a lawyer in case she some day has to sell the house. We are 7 children. All of us would like my mother to sell her house. She will need the money to live. Children are not interested in any inheritance.Mother should become my father's guardian . Dad is incapable of making decisions.What to do? Please explain the process.

#37 DAVID | August 30, 2010

My Grandfather inherited 99 acres of farm land in Ciales, P.R. along with 3 other brother's, He left the town (circa 1937) to go to the city of Ponce where only one of the brother's stood and worked the land. My grandfather claims this particular brother claimed the land for himself (illegally. To this day no challenge has been made on this claim. My grandfather is still alive 104 years old, All remaining siblings have passed. What recourse does the family have. Please explain the process.

#38 MILDRED | September 02, 2010

My father passed away 17 years ago and left no will. He was married for two years and his widow is still living in the house. How do the inheritance law work in this situation? If we decide to sell the property is the widow entitled to anything?

#39 FEL GONZ | September 16, 2010

My father just passed away in PR and we are not sure of what his assets are. We dont live there so we are not sure as to how to begin since we are not familiar with inheritance laws there. I know there is a time line for probate since he didnt leave a will. how can we start this process.

#40 DENISE | January 17, 2011

My father's step-mother died and the inheritance was only divided among the biological children. The problem is the house was financed, in part, through the sale of the first house owned by his father and biological mother. My father never saw his legitimate portion of the sale of the land and property, and it is unclear how the civil courts allowed the sale to go through without ensuring apportionment or some form of trustee for his inheritance as he was a minor when his mother died and the property sold. How does he go about disentangling this--if it is possible?

#41 MARIA FERRER | March 25, 2011

I live in Massachusetts and I just found out that my maternal grandfather died on 8/15/2010 and was buried by his nieces (daughters of his sister whom died several years ago). My mother was the last of his children that were alive and my mother passed away on 4/15/2000. My siblings and I are the last surviving closest relatives. We would like to kmow what do we have to do to claim the house when there was no will nor do we know what happened to the house.

#42 KRIS | December 03, 2011

Hello,
I live in NYC and one yr ago my father passed. He was owner of a home and other belongings. The woman he was with for about 12yrs (never married) locked all of his children (7) out of the home and did as she pleased with his belongings (car, motorcycle, jewelry, clothes etc) one of the children (the youngest 16) resided in the home. she forced us to remove his belongings within one week of my fathers death and stated that by law she could lock us out of the house as she is part owner of the home. I am the only one of my fathers children who does not have his last name. (which i am currently changing) my fathers family knows that i am his daughter as i was always in his life and are willing to attest to that. This woman recently had her lawyers contact my sister stating that she wished to buy us out. neither one of us want to do that. Please assist me in regards to where I should start as far as getting representation for myself and if you see anything wrong with what she has done.

#43 MARIA DELPILAR | April 08, 2013

My situation is that my father passaway this 7/2012 and I am the only child bearing his name. Before passing he met with a lawyer in Puerto Rico and had a Will created indicating that he was living his house in PR to his brother and his brothers son. I have not seen this paper work to confirm that this is true if it is so am I entitled to a portion of this property at all?

#44 VERONICA CAMPOS | March 01, 2014

Nobody paid the taxes on my grandfathers house since 1991, he has 4 living sons and my dad one of them is very old now. Does paying the taxes gives more ownership of the house?

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