What the 2055 Extension Means for Your Estate Plan

By Hans E. Riefkohl, Esq. | Riefkohl Law

Puerto Rico's Act 60 tax incentive program just received a 30-year lifeline. If you hold a decree or are considering one, your estate plan needs a second look.

When Puerto Rico enacted Act 38-2026 earlier this year, it did something remarkable: it extended the Individual Resident Investor incentive under Act 60 through December 31, 2055. That single legislative change transformed what many viewed as a temporary tax strategy into a multi-generational planning opportunity.

For existing decree holders, this is not simply good news to file away. It is a call to action. The plans you made when Act 60 had a shorter horizon may no longer be adequate for the reality you now face --- a reality where your decree benefits could, in principle, remain relevant for decades to come.

This article explains what Act 38-2026 changed, why the extension matters for estate planning, and the concrete steps you should take to align your estate plan with the new timeline.

What Act 38-2026 Actually Changed

Act 38-2026 extended the sunset date of the Individual Resident Investor incentive (formerly known as Act 22, now Chapter 2 of Act 60) from its previous expiration to December 31, 2055.

In practical terms, this means:

• New applications for Individual Resident Investor decrees can be filed through 2055.
• Existing decree holders benefit from the extended legislative framework, though individual decree terms still govern the specific duration of each holder's benefits.
• The core tax exemptions remain the same: 100% exemption on Puerto Rico-sourced capital gains, interest income, and dividend income for qualifying individuals who establish bona fide residency on the island.

What the extension did not change is equally important. It did not alter the substantive requirements for obtaining or maintaining a decree. Residency requirements, the annual charitable donation, the employment obligations for certain decree types, and the annual reporting obligations all remain in place.

It also did not create any new estate tax benefits. Act 60 does not provide exemptions from federal estate tax, and Act 38-2026 did not change that. This distinction is critical for estate planning, as we will discuss below.

Why the Extension Matters for Long-Term Estate Planning

Before Act 38-2026, many advisors treated Act 60 benefits as a medium-term income tax strategy. You moved to Puerto Rico, held assets that generated exempt income, and planned to enjoy those benefits for a defined period. Estate plans were often built around the assumption that the incentive program might not survive indefinitely.

That assumption is now obsolete. With a 30-year extension on the books, Act 60 has become a fixture of Puerto Rico's economic landscape. And when a tax benefit has a multi-decade horizon, it fundamentally changes how you should think about wealth transfer.

Multi-Generational Trust Planning Is Now Viable

Consider a 50-year-old decree holder in 2026. Under the extended timeline, Act 60 benefits will remain available through 2055 --- when that individual will be approaching 80. More importantly, the decree holder's children, if they establish their own residency and qualify for their own decrees, could potentially benefit from the program for a significant portion of their own wealth-building years.

This creates a genuine opportunity for multi-generational trust planning that was difficult to justify when the program's future was uncertain. Irrevocable trusts, dynasty trust structures, and family limited partnerships can now be designed with the confidence that the underlying tax framework will persist.

Under Puerto Rico's trust law (Law 219-2012, the Ley de Fideicomisos), it is possible to create trusts that last for extended periods and that can hold income-generating assets producing Act 60-exempt income. The 2055 extension means these structures no longer need to be designed around the risk that the program will expire during the trust's lifetime.

The Compounding Effect of Three Decades

The power of tax-free compounding over 30 years cannot be overstated. An investment portfolio generating 7% annual returns that is exempt from capital gains taxation will produce dramatically different results than one subject to the standard federal long-term capital gains rate.

For estate planning purposes, this means the assets you hold inside your Act 60-exempt structure have the potential to grow substantially larger than they would have under a shorter time horizon. Larger asset accumulations create larger estate tax exposure, which makes proactive planning even more essential.

How Existing Decree Holders Should Update Their Estate Plans

If you obtained your Act 60 decree before 2026, the extension changes the calculus of your estate plan in several concrete ways.

1. Review Your Trust Structures

Many decree holders established irrevocable trusts or other structures shortly after relocating to Puerto Rico. These plans were often designed with a shorter time horizon in mind. Now is the time to review whether those structures still serve your goals.

Key questions to ask:

• Does the trust's term align with the 2055 extension? If your trust was designed to terminate or distribute assets on a timeline that predated the extension, you may be leaving benefits on the table.
• Are the trust's investment provisions flexible enough? A trust that will operate for 30 more years needs investment provisions that can adapt to changing market conditions.
• Does the trust properly address the succession of decree benefits? As we discuss below, your decree does not automatically transfer to your heirs. Your trust should account for this.

2. Revisit Your Asset Allocation Between Jurisdictions

With Act 60 benefits now extending to 2055, the proportion of your wealth held in Puerto Rico versus other jurisdictions deserves reconsideration. Assets that generate Act 60-exempt income should generally be positioned within structures that maximize the benefit of that exemption over the extended period.

This does not mean moving everything to Puerto Rico. It means ensuring that the assets most likely to generate capital gains, interest, and dividend income are appropriately situated to benefit from the exemption for as long as possible.

3. Coordinate with Federal Estate Tax Planning

Here is where many decree holders make a critical mistake: they assume Act 60 covers estate taxes. It does not.

Your estate remains subject to federal estate tax regardless of your Act 60 decree. The One Big Beautiful Bill Act made the federal estate tax exemption permanent at approximately $15 million (indexed for inflation), which provides significant protection. But for decree holders whose exempt income has allowed their estates to grow well beyond that threshold, the estate tax exposure can be substantial.

Your updated estate plan should coordinate your Act 60 income tax benefits with strategies to manage federal estate tax liability. This may include lifetime gifting programs, grantor retained annuity trusts (GRATs), charitable planning, or other techniques that reduce the taxable estate while preserving Act 60 benefits during your lifetime.

4. Update Beneficiary Designations and Powers of Attorney

With a longer time horizon, the likelihood increases that your circumstances will change. Beneficiaries may predecease you, family dynamics may shift, and your own wishes may evolve. Ensure that your estate planning documents include flexible provisions --- such as trust protector powers, decanting authority, or powers of appointment --- that allow adaptation without the need for costly restructuring.

Impact on Irrevocable Trusts Created Under Current Decrees

A common question from decree holders who have already established irrevocable trusts: does Act 38-2026 affect existing trust structures?

The answer depends on how the trust was drafted.

If your irrevocable trust was designed to hold assets that generate Act 60-exempt income, the extension is generally favorable. The trust can continue to benefit from the exempt income for a longer period, assuming the decree holder remains in compliance.

However, irrevocable trusts present a challenge: they are, by definition, difficult to modify. If your trust's terms include provisions tied to the original expected duration of Act 60 --- for example, distribution triggers linked to the program's expiration or investment mandates that assumed a shorter horizon --- those provisions may now be misaligned with reality.

Puerto Rico trust law does provide mechanisms for modifying irrevocable trusts under certain circumstances, including judicial modification and non-judicial settlement agreements. If your trust needs updating in light of Act 38-2026, consult with a Puerto Rico trust attorney who understands both the trust law and the Act 60 framework.

The Succession Planning Question: What Happens to Your Decree When You Die?

This is perhaps the most misunderstood aspect of Act 60 estate planning, and the 2055 extension makes it more important than ever.

Your Act 60 decree is personal to you. It does not transfer to your spouse, children, or trust beneficiaries upon your death.

When a decree holder dies, the decree terminates. The income tax exemptions it provided cease. Any assets that were generating Act 60-exempt income will, after the holder's death, generate income that is subject to ordinary tax rules.

This creates a critical planning challenge: how do you structure the transition of income-generating assets from a tax-exempt environment to a taxable one, while minimizing the overall tax impact on your family?

Several strategies merit consideration:

• Encourage family members to obtain their own decrees. If your children or other heirs establish bona fide residency in Puerto Rico and obtain their own Individual Resident Investor decrees, they can continue to benefit from Act 60 exemptions on income generated by inherited assets. The 2055 extension makes this a realistic long-term strategy.
• Structure trusts to facilitate decree transitions. A well-drafted trust can be designed so that, upon the death of the original decree holder, assets flow to beneficiaries who hold their own decrees. This requires careful coordination between the trust instrument, the estate plan, and the family's residency planning.
• Consider the timing of asset transfers. Lifetime gifts of appreciated assets to family members who hold their own decrees can be more tax-efficient than testamentary transfers, particularly when coordinated with the federal gift and estate tax exemption.

Forced Heirship Implications for Extended Decree Benefits

Puerto Rico is one of the few U.S. jurisdictions that retains a system of forced heirship. Under the Civil Code of 2020, certain heirs --- known as legitimarios --- have a right to a portion of the deceased's estate (the legítima) that cannot be freely disposed of by will.

For Act 60 decree holders, forced heirship creates a unique tension. You may wish to concentrate your Act 60-benefiting assets in the hands of family members who will maintain Puerto Rico residency and obtain their own decrees. But the forced heirship rules may require you to distribute assets to heirs who have no intention of living in Puerto Rico.

There are strategies to navigate this tension, but they require careful drafting:

• Use of trusts to satisfy the legítima. Under certain circumstances, the forced heirship obligation can be satisfied through trust distributions rather than outright transfers. This allows you to maintain some control over how assets are managed even after they pass to legitimarios.
• Separate Act 60-benefiting assets from other estate assets. By structuring your estate so that Act 60-related assets and non-Act 60 assets are held in distinct vehicles, you can potentially satisfy forced heirship obligations with non-Act 60 assets while directing Act 60-related assets to heirs who will maximize their value.
• Lifetime planning to reduce the legítima. Certain lifetime transfers and planning techniques can reduce the size of the estate subject to forced heirship, giving you more flexibility to direct Act 60-benefiting assets as you wish. These strategies must be carefully implemented to avoid challenge by legitimarios.

The intersection of forced heirship and Act 60 planning is complex and highly fact-specific. For a deeper exploration of this topic, visit our Act 60 Trust Planning resource page.

What You Should Do Now

Act 38-2026 is good news for decree holders, but good news without action is a missed opportunity. Here is a practical checklist:

1. Pull out your existing estate plan and review it with the 2055 extension in mind. Ask whether the assumptions that guided your original plan still hold.
2. Identify assets generating Act 60-exempt income and evaluate whether they are optimally positioned for the extended timeline.
3. Discuss decree succession with your family. Determine which family members might obtain their own decrees and begin the residency planning process.
4. Review your federal estate tax exposure. With decades of tax-free compounding ahead, your estate may grow well beyond the federal exemption threshold.
5. Consult with a Puerto Rico attorney who understands both the Act 60 framework and Puerto Rico trust and estate law.

Schedule Your Free Strategy Call

The 2055 extension has changed the game for Act 60 estate planning. Whether you are an existing decree holder, are in the process of applying for a decree, or are considering a move to Puerto Rico, now is the time to ensure your estate plan is built for the long term.

Hans E. Riefkohl helps Act 60 decree holders protect and transfer their wealth through coordinated estate planning and Puerto Rico trust structures. With deep experience in both the Act 60 incentive framework and Puerto Rico succession law, he provides the integrated guidance that this unique planning environment demands.

Call (787) 236-1657 or email hans@riefkohllaw.com to schedule a complimentary strategy session. We will review your current estate plan, identify gaps created by the 2055 extension, and outline a roadmap to protect your family's wealth for decades to come.

This article is for informational purposes only and does not constitute legal or tax advice. Every situation is unique, and you should consult with qualified legal and tax professionals before making decisions based on the information presented here.