Monday, April 19, 2010

Inheritance Laws in Puerto Rico

I consider myself a logical and reasonable person therefore I have never really thought of what happens to “my” money and ½ of “my” house. I consider it all “ours”. Being a reasonable person I made the assumption that if I were to die that the person whom I have chosen to spend the rest of my life with, the person that I would follow anywhere, the person whom I have committed myself to legally, would be able to continue to live in “my/our” house and continue to have “my/our” savings. But I have learned that that is not true in Puerto Rico (and possibly many states). My wife could be forced to give up ½ of the house and ½ of the savings or ALL of the savings to pay for the ½ of the house. She could be left with no savings and no money to live on if she kept the house. The money could be forcefully taken from her and given to my relatives or children. That’s if you don’t have a Puerto Rican will. Even if you have a Puerto Rican Will you still can not give your surviving spouse all of the house and money. 25% - 33% of it MUST go to a relative!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! This isn’t an issue with our families because we know they would do what we wished but it’s the most absurd thing I have ever heard of. If you had an adult child who was a criminal and one of you died the surviving spouse would have to give ½ of the house and money to the drug addict child. If you had a will excluding as much as you can the kid would still get possibly 1/3 or more of the deceased’s ½ possibly forcing you to sell the house. If there are no kids it goes to the parents of the deceased. So people are forced to spend over a $1000 on wills so the surviving spouse can hopefully hold on to 1/2 of the deceased's portion of the house and money. While the remaining portion goes elsewhere. And get this, we need to bring 3 witnesses with us for the reading and signing of the wills. It could take an hour and its a long drive for most of our friends. Looks like we "Better Call Saul". (Breaking Bad reference)

28 comments:

Cassie said...

Yah, we heard about the old Spanish inheritance laws on the books there in PR. A man we met in PR said it took him forever to be able to give his wife the house they had lived in as part of the divorce decision.

I think this is part of the reason so many people don't have mortgages...it's impossible to be sure that all the title work, paper work, all the relatives agree and so on. So they just stay in the same house for free of losing it! I didn't realize they could take the money though. Crazy! And it is very much more a burden on the woman than the man from what I understand...

Anonymous said...

The craziest thing is that having both names on the title doesn't matter - my father would get my part before Jeff would. Then my sister would be next in line (the sister I have seen once in 15 years). This also include IRAs (if you are lucky enough to have them) where you have designated a "beneficiary." That gets overruled once you live here. Hmmm...guess we better die together underground or out at sea!

Jeff and Katrina Kruse said...

It’s funny. Yesterday we went diving at Shacks. I saw the conditions on the surface as very good/safe and Katrina was hesitant. Then when we got in the water and went through the cave to the outside of the reef David and I wanted not to go too far and Katrina just looked at us like we were chicken. She wanted to keep on going.

Katrina is fearless sometimes and I worry about her. She will squeeze into a cave so small no one can help her if she gets hurt.

Rosa said...

You just hit on a very sore subject, when we were building our house there, our lawyer Domingo told us this great news, which I was sick to my stomach over it. Frank has two not so sweet sons and I would be damned if I let them touch my house...that will be when I blow it up! ;)

Ivan said...

Jeff, I have an idea, adopt me as your child, if something happens to you, everything that will go to me, I give it to Katrina :-)

Anonymous said...

Why don't you guys explore the possibility of establishing a Joint Revocable Living Trust?

You and your spouse, as a married couple, can provide in a Revocable Living Trust agreement that all or part of your assets are declared to be held by you as Co-Trustees, for your benefit during your lifetimes, and upon death of either of you will go to the surviving spouse, or in the event of simultaneous deaths will go directly to designated beneficiaries. Immediately upon the death of either spouse, all legal interest in all the property automatically reverts to the surviving spouse, as sole trustee, free and clear from any probate processes or other court delays.

The transfer by a Will requires the probate process, whereas the Revocable Living Trust completely avoids the probate process as well as the need for an attorney. The Revocable Living Trust establishes that the title (ownership) of the property was transferred when the trust agreement was executed (while you were both alive) and not after death as in the case of a Will.

You will need to explore how to establish a Joint Revocable Living Trust in PR as a territory of the US if at all possible.

Best,

H Jr.

Anonymous said...

By the way, here is a good link to start getting familiar with Revocable Living Trusts:

http://www.trustbuilders.net/faqs.asp

Take care,

H Jr.

Rosa said...

Interesting stuff, let me know if you find anything new about this because with our lawyer Domingo, he said that the laws of PR trump any estate planning laws. The only way to get around it, or “create roadblocks”, is to transfer the property to a corporation that you would setup to shield the children
from directly getting it.

Anonymous said...

Here is more information if you are interested:

http://www.caregiver.org/caregiver/jsp/content_node.jsp?nodeid=434

You can scroll down to where is titled "Revocable Living Trust" for more info. I think in Puerto Rico you will have to find a lawyer that knows about Revocable Living Trusts. They supersede a Will as the link suggests only if:

"Note: In order for a Living Trust to function as a Will substitute and avoid probate, the settlor's assets must be transferred into the Living Trust during the settlor's lifetime."

Once a RLT is established you need to start "funding" it or basically transferring all your assets, real estate, LLCs (a good idea if you have rental property), life insurance benefits, etc. Like the link states, a Will can still be written, but as a "pour over" document in case there is anything else you might have missed to transfer under your RLT. However, for any properties you did not transfer under your RLT, they may not be able to avoid probate.

If you do this in mainland, you can transfer any properties (i.e. vacation home in PR) under your RLT. I don't know how to get an RLT established in PR, you may want to ask a lawyer about a "Fideicomiso-En-Vida Revocable" if my translation is not screwed up.

Good luck,

H Jr.

Anonymous said...

Here is more interesting stuff if you are still interested:


"The laws of eight states—Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, and Washington—and Puerto Rico provide that most property acquired during the marriage by either spouse is held equally by husband and wife as community property—that is, as property belonging to both spouses. (Alaska and Wisconsin have some community property elements in their law but are not true community property states.) The major exceptions are property acquired during the marriage by inheritance or gift. In a community property state, when one spouse dies, his or her half of the property passes either by will or operation of law; the other half of the property belongs to the surviving spouse.

If you live in a community property state, you can only dispose of your half of the community property via a will or a trust. If you and your spouse have the same estate-planning objectives, it's no problem. But if you don't, living in a community property state could make it more difficult to meet your estate-planning goals."


Apparently, Puerto Rico is not the only area in the US where this "community property state" classification applies. It sounds like if you both have the same estate planning objectives a Revocable Living Trust could help you outline how you want your property to be passed. Otherwise, a Will or "operation of law" (in this case a state or territory law) kicks in and sends your property through probate. You will need to find out if the establishment of an RLT could prevent your assets having to go through probate (by Will or law) in Puerto Rico.

BTW, the requirement for 2 or 3 witnesses is common everywhere when preparing a Will. Witnesses are there to certify you have made the Will, but they don't have to know the Will's contents. The witnesses must be impartial in case they're called to testify about your will's validity and your competence at the time of writing it.

Best of luck,

H Jr.

Fran and Steve said...

We live in California, which is also a community property state. Those problems with inheritance don't apply here. The surviving spouse gets the property, period. Without probate. I wonder if this is an issue in PR, as H Jr mentioned, only when the property was acquired as a result of an inheritance or gift. It's hard to believe that such a law would apply to property purchased in PR by a married couple. And hard to believe it applies to IRAs, especially those held in US accounts. Does anyone who comments here know for sure? Fran

Anonymous said...

Sorry Fran, even WITH wills 25% of the deceased spouses "half" will go to that spouses parent if they are alive. You can skip the brother/sister/kids I think but not the parents. The IRA question is still a question. Our best friend and dive buddy is a lawyer who knows all this stuff. He told us of a couple specific ones involving people from England who moved here and a case from the states. PR archaic rules trump all! Even if the parent just gives the money or house back, there are tax ramifications and a bunch of paperwork things to go through. Better hope you are the first to die!

Anonymous said...

Does your friend know if there is a way to establish a Joint Revocable Living Trust in PR?

If established, could it serve as a substitute to a Will and avoid probate altogether the same way it does in mainland?

Could it avoid the PR court system which dictates HOW inheritances are to be distributed once it goes into probate?

Many thanks in advance!

H Jr.

Anonymous said...

I'm sorry, I believe my last question was not well written. I mean the following:

Could a Trust avoid the PR court system which dictates HOW inheritances are distributed when they have to go through probate?

It is my understanding that if there is no Will present, the courts take over the process. Even if there is a Will, the courts take over the process through probate. Both situations are painful and slow to resolve anywhere actually. The establishment of a Trust prevents this altogether here in mainland. Could it do the same in PR?

Thanks again,

H Jr.

Jeff and Katrina Kruse said...

Again I want to state that we don’t have a problem with our families.
It’s the opposite, we just don’t want to cause them any aggravations or have any delays or any tax ramifications.

From what I understand a Trust here can’t overcome the forced inheritance laws.

With a will:
Kids involved - 1/3rd to anyone, 1/3rd to a specific kid, 1/3rd divided between the kids.
No Kids – ½ to anyone, ½ to parents. If no parents, then 100% can be given to anyone.

IRA’s I am still not sure of. I did read on the internet that go to the designated beneficiary.

Also as I understand, even when you’re still alive you cannot give away your house or money to avoid the forced inheritance laws!

Jeff

Anonymous said...

Jeff,

Thank you very much! Sorry to have overwhelmed your blog. This is an issue that we are working with our own family and I just wanted to share what we have found. My wife and I have a JRLT that we setup here in mainland. At some point in the future, we will have to transfer any inheritance we have in PR under our Trust. We are still investigating all the implications of that process. Our initial investigations in PR left us perplexed as they were not familiar with a Trust at all.

BTW, my Mom's family have gone through almost 25 years in the court system trying to finalize the inheritance issue as my grandparents did not leave a Will established. It is still not completed.

Thanks again!

Best always,

H Jr.

Jeff and Katrina Kruse said...

That’s exactly why I want the wills.

Even though everyone agrees, the surviving spouse can’t wait 25 years for access to the money.

This may also be why it can be so hard to buy a house here.

Good luck getting your moms situation taken care of.

Jeff

Anonymous said...

I don't know if you are aware that the surviving spouse has the rigth to continue living in the property she or he is using as a primary residence. This is called "derecho de viuda". So anyone who was entitled to get part of the 50 percent of the deseased spouse has no rights to ask for the estate to be liquidated.

Other planning you could use, although more complicated is if you are married get a divorce. Sign a pre-nuptial agreement disolving the communion property that married couple gets by default, and remarry. And now you are two separate individuals under PR law. Using this you could setup a corporation to own your property and just do a simple share transfer whenever someone gets on their death bed.

Jeff and Katrina Kruse said...

The surviving spouse may not be forced to sell the house but they may be forced to give up the cash that they had as to pay off the inheritors.

Even if you are single you cannot avoid the forced inheritance laws here. Single or married it doesn’t really matter because the surviving spouse is 4th on the list. And if you try to avoid the law by using a corporation or whatever it won’t work because the forced inheritance law supersedes.

Anonymous said...

So, are we going to cave in lava tubes, take up surfing and move to Hawaii? How about Costa Rica (oh, I guess the militants are first in line), Mexico? We could become crack heads and move to Panama (or is it gun brokers?). Who knows where the Kruse's will go...(not back to the states though)

rosa said...

Well, Hawaii is too expensive and too commercial, do not know much about Costa Rica, but Mexico...hate all the crimes against women...

Like my mother use to say,there is no perfect place (when we told her we were leaving PR to go NJ), each place comes with their own problems. Enjoy today!
I will be in Rincon at the end of May...maybe we could get together..

Anonymous said...

Rosa - You got my point (now I wish the spouse would). Nowhere is perfect and for me gardening and weather (I HATE being cold) are the things I want along with lots of outdoor activities! We considered Hawaii but it is too expensive, too cold (air and water) and Jeff insisted on American money, health care and a stable government. I don't know how stable it is here in PR but when the world goes "Mad Max" I think it will be a great place - it is kind of a free for all already! Yes - let us know when you are here! katrina

sancho413 said...

Great thread of info here, thanks. Gives us alot to think about as much as we don't want to...

Anonymous said...

Can someone advice me what form do i use to waive the inheritance rights in mjy father estate and instead have my share go to my mother.i have two older brothers they in new york and im the youngest living in puerto rico they want to waived the rights and give it back to my mother so she have total rights now what i want to know is this allowed in puerto rico? does it goes back to the dead relative brothers and sisters? how its done. thank you any advice would be nice.

Anonymous said...

My husband and I made a will in the states making each other executor and sole beneficiary. He inherited the home in PR that he grew up in after his mother died for his brother and father had also passed. There is a half brother from the father that was paid yrs. ago to give up his right to the house and a son from my husband's 1st marriage. My husband was living in this house when he died this pass December and I in the states due to financial reasons. What rights do I have as his spouse or now widow?
I've been given through several PR lawyers conflicting info.. One says I get 50% and the son 50%. Another, I get 75% and the son 25% because a will does exsist. Not that it holds alot of validity in PR. Can anyone educate me on this because I want this done fairly and do not want to be ignorant of what is rightfully mine. My husband did not want any of his family or son to get anything upon his death for they were never there for him. HELP!

Anonymous said...

If you are considering this move make sure you are also aware of the outrageous and antiquated inheritance laws in Puerto Rico. Inheritance laws affect everyone, but anyone who is divorced or whose spouse is divorced and has children from another marriage/union needs to be informed. Everything except insurance policies are considered in your estate and even 1/2 of your spouse's 401k, IRA, cars, other property could be split and given to your spouse's children instead of your own. Wills here are not like in the US and any pre-marital agreements made elsewhere are NOT valid on the island. In order to protect yourself "some", you will need to have a pre-nup in Puerto Rico before marriage. Check the laws!!!

Anonymous said...

Puerto Rico IRAs go through the estate and are subject to the mandatory inheritance laws. The only exception that I am aware of are ERISA governed retirement plans and maybe IRAs located in the mainland (but I am not sure) if there was a designation of beneficiary. Sell everything before you die and leave your heirs lots of life insurance so that they can use the proceeds while they wait 30 years to collect from the estate. Also never get married without a pre-nup in Puerto Rico. My grandparents got divorced 50 years ago and died 34 years ago and neither their divorce or estate have been settled. My dad got divorced 17 years ago and his divorce has not been liquidated. He now died and both my grandparents' estate and divorce and my dad's divorce are now part of my dad's estate. I just had to pay my share of property taxes on my grandmother's house that is completely dilapitated, has been abandoned for more than 30 years and seriously vandalized. I suggested to my cousins that we donate it to anyone willing to take it so that we no longer have to pay property taxes and some of the heirs objected!

Fran and Steve said...

I just found out that Law 170 was amended December 2013 to allow surviving spouses to supersede siblings, nieces, and nephews for inheritance purposes. So... if parents are deceased and there are no children, property passes to surviving spouse. -- Fran