October 15, 2020 | Category: Financial Planning
By: Francisco de Jesús Ruiz, Esq. FPQP TM
On November 28, 2020, the new Civil Code of Puerto Rico will go into effect. As the primary source of private law in Puerto Rico, the Civil Code regulates the main topics that govern a person’s life and daily interactions with society.
At Popular One, our commitment is to keep you informed of any changes that could impact your financial goals. For your convenience, we summarized the most important changes in the New Civil Code that could potentially impact your estate plan.
Some of these changes include:
Once the new Civil Code goes into effect, the heir's responsibility regarding the deceased's obligations or debts will be limited to the value of the assets or property inherited. This new provision protects the heir, as a general rule, from having to use their personal assets to cover the estate's debts when these exceed the assets.
If the deceased did not establish his or her intent through a valid will, the Code provides a succession order. The new Code places the surviving spouse as first in line of succession, on equal footing with the descendants.
In case there is a valid will, under the new rules, the testator may dispose of his or her inheritance in two halves:
This changes the portion reserved for forced heirs from two thirds to one half of the estate, since the betterment third portion that existed under the previous Code is eliminated. The half of the estate reserved to the forced heirs now includes any surviving descendants and the spouse, or if there aren’t any, the ascendants. Through the free disposition part of the inheritance, the testator may freely allocate up to half of his or her estate to any person. In the absence of any surviving children, spouse, or parents, 100% of the estate will be considered as free disposition and given to the person designated by the testator.
The only common wills that will be accepted are open and holographic (or handwritten) wills; closed wills were eliminated in the new Code. Wills executed under peril of death and in case of an epidemic will be accepted as special wills. The requirements to validate an open will, indeed form before a notary public were loosened, including no longer needing to have three witnesses when executing the deed of last will.
Regarding donations made by an individual to his/her heirs as an advance to their inheritance, under the new Code, only donations made during the last ten years before the person’s death, must be computed and considered as an advance of the heir’s inheritance.
Regarding the right to the family residence, the new Civil Code grants the surviving spouse a preferential right to ownership of the property upon the estate's division and the community property. This right is subject to several conditions included in the law.
Contact your private banker to help you better understand how these changes can impact your family and financial situation. Our team of experts will help you ensure the protection of your loved ones.
The information provided is for educational purposes and for your independent consideration. This material should not be considered as investment advice, recommendation, or an offer of any particular security, strategy or investment product or service. Readers are urged to seek professional advice with respect to their specific financial and investment matters.
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