Can a Trust Cut Children Out of an Inheritance in Puerto Rico?
Analysis · August 11, 2026 · Trusts & succession law
In Puerto Rico, the answer is supposed to be no — and right now that answer is genuinely in doubt. A San Juan trial court held that bank accounts a decedent had moved into two lifetime trusts fell outside his estate, and therefore outside the reach of the forced share his other children were claiming. The Court of Appeals declined to review it. The excluded heirs took the question to the Supreme Court of Puerto Rico, where it is now pending. How that court answers will define how much room estate planning actually has on the island — and how solid the protection is that many families take for granted.
If you moved to Puerto Rico under Act 60 with a mainland revocable trust and a mainland set of assumptions, this is the case to watch. It runs in both directions: it may be the crack that lets a trust override forced heirship, or the ruling that confirms it never could.
The case at a glance
Case: Báez Vallecillo v. Vientós Pacheco — division and liquidation of an estate and marital community.
Path: San Juan trial court, SJ2023CV10261 → Court of Appeals, TA2026CE00539 and TA2026CE00540 (consolidated) → Supreme Court of Puerto Rico.
Question: whether Section 2022.01(b)(3) of the Puerto Rico Internal Revenue Code automatically removes lifetime transfers to a trust from the decedent’s estate.
Status: petition for certiorari filed June 29, 2026; pending.
What Puerto Rico law reserves for children
Puerto Rico is a civil-law jurisdiction, and its succession rules are not the ones most U.S. estate plans are built on. The legítima — the forced share — reserves a portion of the estate for a decedent’s forced heirs, and as a general matter the decedent cannot take it away. Under the 2020 Civil Code, half the estate is reserved for the forced heirs and divided equally among them; the other half is freely disposable.
A reserved-share rule means nothing if the decedent can empty the estate before dying. So the Civil Code looks backward through three mechanisms:
Computation — notionally rebuilds the estate by adding back the value of lifetime gifts not excluded by law, so the forced shares can be calculated.
Collation — charges what an heir already received during the decedent’s life against that heir’s share, so they take correspondingly less at partition.
Reduction of inofficious gifts — cuts back a gift that invades someone else’s forced share.
Article 1788 of the Civil Code sets the boundaries of that exercise: only gifts made within the ten years preceding death are counted, and certain ordinary outlays are left out entirely — support, education, and medical care, the expenses that answer to a natural or legal duty of family assistance. It is a narrow carve-out for everyday spending, not a general rule for moving property out of an estate.
The tax provision that opened the crack
Since 2017, Section 2022.01(b)(3) of the 2011 Internal Revenue Code — added by Act 9-2017 — has provided that property transferred during life to certain trusts is not included in the decedent’s gross estate. The operative text reads:
“Notwithstanding the foregoing, where property was transferred to a Puerto Rico trust whose trustee is not the decedent and the decedent was a resident of Puerto Rico at the time of death, such property shall not be included in the decedent’s gross estate, even where the decedent was a beneficiary of that trust, if the trust does not terminate by reason of the decedent’s death and the trust assets do not have to be collated in order to comply with the provisions of the Civil Code.” (Translation ours; the controlling text is in Spanish.)
Read plainly, that provision addresses what goes into the estate for tax purposes — much as the Code elsewhere supplies a formula for computing gross income. It sits in the estate-and-gift subtitle of the tax code, not in the Civil Code.
The legislative history points the same way. House Bill 3 of 2017 was a professional-retention measure aimed at making retirement plans more flexible and less costly. As originally drafted, Section 2022.01(b)(3) was categorical — it was enough that property had gone to a Puerto Rico trust whose trustee was not the decedent. The Department of Justice warned that language so drafted could be used to cut a forced heir out entirely, and recommended qualifying it. The Legislature took the warning and added exactly the condition emphasized above: the exclusion applies if the assets do not have to be collated to comply with the Civil Code.
That edit was not housekeeping. It makes the exclusion conditional rather than automatic: you have to run the succession analysis first, and the exclusion operates only if that analysis shows no collation is required.
What the trial court held
The decedent had moved assets during his lifetime into two trusts, identified in the record as the BV Trust and the AV Trust, whose beneficiaries excluded three of his children. The proposed partition accounting neither included nor mentioned those accounts. According to the petition, one of them held roughly $693,844 at the date of death, and the transfers at issue exceed $600,000 — a substantial slice of the estate, benefiting two of six forced heirs.
On February 20, 2026 the trial court held those assets were excluded from the estate, resting on two pillars: Section 2022.01(b)(3), read as meaning that property transferred to a trust during life simply is not part of the estate; and Article 1788 of the Civil Code, on the view that these were non-computable expenses. Reconsideration was denied March 31. The Court of Appeals denied certiorari on May 29, treating the ruling as an interlocutory order reviewable after final judgment.
Timeline
February 13, 2023 — the decedent dies; inventory and appraisal begin.
October 1, 2023 — the excluded heirs sue to obtain the estate records.
September 11, 2025 — the proposed partition accounting is filed, omitting the trust accounts.
February 20, 2026 — the trial court excludes the trust assets from the estate.
May 29, 2026 — the Court of Appeals denies certiorari in the consolidated petitions.
June 29, 2026 — petition for certiorari filed in the Supreme Court.
The competing arguments
The petitioners argue that a tax-code exclusion cannot displace mandatory rules of succession. Their case rests on four legs: the legislative intent behind Act 9-2017 was retirement-plan trusts, not a general exclusion; the text itself conditions the exclusion on compliance with the Civil Code; doctrine and case law both recognize that gifts made through trusts remain subject to collation and reduction; and Article 1788 is a narrow exception for ordinary expenses, not a license to move substantial wealth out of an estate. They add a settled canon of construction: implied repeals are disfavored, and nothing in Act 9-2017 expresses any intent to repeal the rules on forced shares and collation.
The respondents press procedural defects — among them that the challenge was never pleaded in the original complaint — and raise a genuinely interesting substantive point: the law routinely provides for transfers that are not collatable, so if educational expenses are not collatable, transfers to a trust serving that same purpose should not be either.
The symmetry is appealing. The problem is scale: if that argument prevails, the exception may end up swallowing the rule. Any decedent could move substantial assets into a trust during life, recite an educational or support purpose, and invoke Section 2022.01(b)(3) to take them out of the estate — whatever the effect on the forced shares. The trust would stop being an administrative vehicle and become a way to do indirectly what the law forbids doing directly.
Why the appellate decisions conflict
This question is not new, and that is much of the problem. The Court of Appeals had previously come out the other way in substantially similar cases:
Rodríguez Toro v. Díaz López — the court affirmed that transfers into trusts benefiting only the children of a second marriage were gifts that impaired the forced shares of the excluded daughters. It expressly rejected both the argument that a lifetime transfer is outside the succession analysis and the argument that the transfers were exempt as health, education, or support expenses.
Valentín Pérez v. Valentín Pérez — the decedent had moved most of his estate into a trust that excluded certain forced heirs; the court held this impaired their forced shares and was contrary to law, noting that the only permitted exception for encumbering a forced share with a trust is where the heir is a minor or legally incapacitated.
Quiléz Velar v. Chévere — recognized that lifetime gifts, including those made through trusts, can be inofficious and subject to reduction.
The commentators agree. González Tejera lists “contributions to a trust with forced heirs as beneficiaries” among the gifts that are collatable or computable.
When panels of the same appellate court reach opposite results on the same question, the uncertainty stops being academic: every trust deed signed in Puerto Rico today is drafted without knowing which line will prevail.
What to do while the Supreme Court decides
My recommendation is caution in both directions.
If you are planning with trusts, do not assume that what you transferred is beyond reach. A plan that only works if the Supreme Court adopts the broad reading of Section 2022.01(b)(3) is not a plan; it is a bet. The prudent approach is to build so the structure survives either outcome — documenting the purpose and consideration behind each transfer, measuring its size against the freely disposable half, and using the tools the law expressly recognizes rather than the ones that depend on a contested reading. Worth noting: Act 153-2026, effective January 30, 2027, changes the revocability presumption but leaves the forced-share rules untouched.
If you are an heir, do not assume that what was transferred is gone. The existence of a trust does not end the conversation: ask for a full accounting of transfers made in the ten years before death, check whether the partition accounting omits them, and object in time — before the partition proceeds on a legal premise that is still in dispute. Deadlines matter as much as the argument.
If you relocated under Act 60, there is a further wrinkle worth naming. Forced heirship applies to Puerto Rico’s situs assets regardless of where your trust was drafted, so a mainland revocable trust does not carry mainland freedom of disposition with it. That mismatch is worth auditing on its own terms — see our guide to estate planning for Act 60 relocatees.
Frequently asked questions
Can a trust disinherit children in Puerto Rico?
As a general rule, no. The legítima reserves half the estate for forced heirs, and lifetime gifts — including gifts made through a trust — are subject to computation, collation, and reduction when they impair it. The question now before the Supreme Court is whether Section 2022.01(b)(3) of the Internal Revenue Code creates an exception to that rule.
What exactly does Section 2022.01(b)(3) say?
That property transferred to a Puerto Rico trust whose trustee is not the decedent is not included in the gross estate — but only if the trust does not terminate on the decedent’s death and the assets do not have to be collated to comply with the Civil Code. That second condition was added during the legislative process, at the Department of Justice’s request, precisely to keep the provision from being used to cut out a forced heir.
How far back are lifetime gifts counted?
Article 1788 of the 2020 Civil Code limits collation and imputation to gifts made within the ten years preceding death. The same article excludes ordinary outlays for support, education, and medical care from the computation.
Does a mainland revocable trust avoid Puerto Rico forced heirship?
Not for assets with a Puerto Rico situs. Where the trust was drafted does not change the succession rules that apply to property on the island, which is why relocating plans usually need to be reviewed rather than simply carried over.
Does this affect retirement-plan trusts?
Under Act 9-2017’s legislative history, retirement-plan trusts are exactly what the exclusion was meant to protect: the measure harmonized local law with the federal ERISA framework so those funds could pass directly to beneficiaries without going through succession. The dispute is whether the exclusion reaches beyond that context.
When will the Supreme Court rule?
There is no set date. The court must first decide whether to issue the writ. We will update this analysis when it does.
The filing
We are publishing the full petition for anyone who wants to read the argument in its own terms — it includes the Act 9-2017 legislative history and the appellate decisions discussed above. It is in Spanish, the language of the Puerto Rico courts.
Download the filing: Petition for Certiorari — exclusion of trust assets from the estate (PDF, June 29, 2026, in Spanish)
Related reading
Forced heirship and your estate plan — how the legítima actually constrains a plan
What is a Puerto Rico trust? — the autonomous patrimony and its limits
The complete guide to Puerto Rico trusts — structure, taxation, and administration
Revocable trusts and Act 153-2026 — what changes on January 30, 2027
Family trust pitfalls — where second-marriage planning goes wrong
Does your plan depend on a reading that is still contested?
We review trust deeds and inheritance positions to identify what survives either outcome.
Hans Riefkohl is a Puerto Rico attorney practicing in trusts, estate planning, Act 60, and corporate law. This analysis is for informational purposes only, comments on a public filing pending before the Supreme Court of Puerto Rico, and is current as of August 11, 2026. Riefkohl Law does not represent any party in this case. A pending case may be resolved differently than anticipated here. Nothing here is legal or tax advice and no attorney-client relationship is created. For guidance on your own situation, schedule a consultation.
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