Your CPA Said You Need a Trust — Here's What That Means in Puerto Rico

If your CPA recently told you that you need to set up a trust, you are not alone. It is one of the most common recommendations for Act 60 decree holders — and one of the most misunderstood. Your accountant can identify the tax advantages, but structuring and creating a trust in Puerto Rico is a legal process governed by a specific statute that differs significantly from mainland U.S. trust law.

This post breaks down what your CPA is actually recommending, what the law requires, and what you need to know before you sign anything.

Why CPAs Recommend Trusts for Act 60 Holders

Act 60 (formerly Acts 20 and 22) provides extraordinary tax benefits to individuals and businesses that relocate to Puerto Rico: exemptions on Puerto Rico-sourced capital gains, interest, and dividends. But those benefits apply to income — not to estate and wealth transfer planning.

When your CPA looks at the full picture of your financial life, they see a gap. Your Act 60 decree shields your investment income from taxation while you are alive. But what happens to the wealth you accumulate? Without proper planning, your estate could face federal estate tax exposure, Puerto Rico forced heirship claims, and probate complications that erode the very wealth those tax incentives helped you build.

That is why your CPA says you need a trust. They are identifying a legal need that falls outside the scope of tax preparation. The next step belongs to an attorney who understands Puerto Rico trust law.

What Law 219-2012 Actually Requires

Puerto Rico trusts are governed by Law 219-2012, known as the Ley de Fideicomisos (Trust Law). This statute replaced the prior trust framework and created a modern, flexible system — but it operates under rules that differ from the Uniform Trust Code used in most mainland states.

Here is what you need to know about the legal framework:

Trusts in Puerto Rico are irrevocable by default. Unlike many mainland jurisdictions where trusts are presumed revocable unless stated otherwise, Puerto Rico law presumes irrevocability. This is a critical distinction. If the trust instrument does not explicitly reserve the right to revoke or amend, the grantor loses control of the assets permanently.

The trust must be created by a written instrument. Oral trusts are not recognized. The trust document must identify the grantor, the trustee, the beneficiaries, the trust property, and the purpose of the trust.

Puerto Rico trusts can hold virtually any type of property. Real estate, securities, business interests, intellectual property, and digital assets can all be placed in trust.

The trustee has fiduciary duties under the statute. Law 219-2012 imposes duties of loyalty, prudence, and impartiality on trustees. These duties cannot be entirely waived by the trust instrument.

Puerto Rico is a civil law jurisdiction. Trust law here operates within a broader civil law framework, which affects how courts interpret trust provisions, how property is classified, and how disputes are resolved.

Types of Trusts Available Under Puerto Rico Law

Law 219-2012 provides for several trust structures. The right one for you depends on your objectives, your decree status, and your family situation.

Irrevocable Trusts

The default under Puerto Rico law. Once assets are transferred into an irrevocable trust, the grantor cannot reclaim them or alter the terms without the consent of beneficiaries (or court approval in limited circumstances). Irrevocable trusts offer the strongest asset protection and estate tax planning benefits because the assets are removed from the grantor's taxable estate.

Revocable Trusts

Available when the trust instrument explicitly reserves the power to revoke. Revocable trusts provide flexibility and control during the grantor's lifetime — you can change beneficiaries, adjust distributions, or dissolve the trust entirely. However, assets in a revocable trust are generally still included in the grantor's estate for federal estate tax purposes.

The Act 60 Exception: Section 45147(b)

For Act 60 decree holders, there is a specific provision worth understanding. Under certain conditions, revocable trusts can be structured to work alongside Act 60 benefits. This requires careful drafting to ensure the trust does not inadvertently disqualify the grantor from decree benefits or create unintended tax consequences. The interplay between the trust instrument and the decree terms must be analyzed on a case-by-case basis.

Charitable Trusts and Purpose Trusts

Law 219-2012 also recognizes trusts created for charitable purposes or specific non-charitable purposes. These can serve as components of a broader estate and philanthropic plan.

How Trusts Interact with Act 60 Decrees

This is where the analysis becomes specific to your situation, and where legal counsel becomes essential rather than optional.

Your Act 60 decree is personal. Tax exemptions under Act 60 are granted to you as an individual (or to your entity). They do not automatically transfer to a trust. Placing assets in a trust does not mean the trust inherits your decree benefits.

Income sourcing matters. The trust's tax treatment depends on how income is sourced, who is treated as the owner of the trust for tax purposes, and how distributions are structured. A grantor trust (where the grantor is treated as the owner for income tax purposes) is treated differently from a non-grantor trust.

Timing of transfers matters. When you transfer appreciated assets into a trust — before or after appreciation, before or after establishing Puerto Rico residency — has significant tax consequences. Your CPA can model the numbers, but the legal structure of the transfer must be correct.

The trust must be properly administered. Ongoing compliance requires coordination between your attorney and your CPA. Trust tax returns, distribution records, and trustee actions must all align with the terms of the trust instrument and applicable law.

What the Trust Creation Process Looks Like

Creating a trust in Puerto Rico is not a matter of downloading a template. Here is what the process typically involves:

Step 1: Strategy session. Your attorney reviews your overall financial picture, your Act 60 decree terms, your family situation, and your goals. This is where the type of trust, the funding strategy, and the administrative structure are determined.

Step 2: Drafting the trust instrument. The attorney prepares the trust document, ensuring it complies with Law 219-2012, addresses forced heirship requirements, coordinates with your decree, and reflects your specific wishes regarding distributions, successor trustees, and trust termination.

Step 3: Coordination with your CPA. Before the trust is executed, your attorney and CPA should review the tax implications together. This includes federal income tax treatment, Puerto Rico tax treatment, gift tax consequences of funding the trust, and estate tax projections.

Step 4: Execution and funding. The trust instrument is executed according to Puerto Rico legal requirements. Assets are then transferred into the trust through appropriate legal instruments — deeds for real property, assignment agreements for business interests, account retitling for financial assets.

Step 5: Ongoing administration. The trustee begins managing the trust according to its terms. This includes record-keeping, tax filings, distribution decisions, and periodic reviews to ensure the trust continues to serve its intended purpose.

Forced Heirship: The Issue Your Mainland Attorney May Not Know About

Puerto Rico's Civil Code of 2020 includes forced heirship provisions — rules that reserve a portion of a decedent's estate for certain heirs (typically children and, in some cases, parents). These rules are rooted in Puerto Rico's civil law tradition and have no equivalent in most mainland U.S. jurisdictions.

Forced heirship means you cannot simply disinherit your children or leave your entire estate to a single beneficiary. A portion of your estate — the legitima — is legally reserved for forced heirs.

How does this affect your trust? If the trust is not structured with forced heirship in mind, it could be challenged after your death. Forced heirs may have claims against trust assets, depending on how and when the trust was funded. An attorney experienced in Puerto Rico succession law can draft the trust to account for these rules, either by satisfying forced heirship requirements within the trust structure or by coordinating the trust with other estate planning instruments.

This is one of the most commonly overlooked issues when mainland attorneys attempt to draft trusts for Puerto Rico residents. It is also one of the most consequential.

What Your CPA Cannot Do — and What an Attorney Must

Your CPA plays a vital role in your financial team. They model tax scenarios, prepare returns, advise on income sourcing, and ensure compliance with IRS and Puerto Rico Department of Treasury requirements. But there are clear boundaries.

CPAs cannot draft legal documents. A trust instrument is a legal document that creates rights, obligations, and fiduciary duties. Only an attorney licensed in Puerto Rico can draft a trust that complies with Law 219-2012.

CPAs cannot provide legal advice on forced heirship. Succession law is a legal discipline. Your CPA can tell you that forced heirship exists, but they cannot advise you on how to structure your estate to comply with it.

CPAs cannot represent you in legal proceedings. If your trust is challenged, if a trustee breaches their duties, or if a beneficiary dispute arises, you need legal representation.

CPAs cannot file deeds or transfer real property. Funding a trust with Puerto Rico real estate requires notarial deeds executed before a Puerto Rico notary (who must also be an attorney in Puerto Rico).

The CPA identifies the need. The attorney fulfills it. The best outcomes happen when both work together from the beginning.

When to Act

If your CPA has recommended a trust, the time to engage an attorney is now — not after tax season, not after your next investment liquidity event, and certainly not after a life event forces the issue. Trust planning is most effective when done proactively, with time to coordinate between your legal and tax advisors.

Key moments when trust planning becomes urgent:

• You have just received your Act 60 decree
• You are purchasing real property in Puerto Rico
• You have experienced a significant appreciation event
• Your family situation has changed (marriage, divorce, birth of a child)
• You are updating your mainland estate plan for Puerto Rico residency
• You are concerned about federal estate tax exposure

Schedule a Free Strategy Call

Your CPA identified the need. Now let an attorney who works with Act 60 holders every day help you build the right structure.

Hans E. Riefkohl advises Act 60 decree holders, entrepreneurs, and families on Puerto Rico trusts, estate planning, and wealth preservation strategies under Law 219-2012.

Call (787) 236-1657 or email hans@riefkohllaw.com to schedule a free strategy call.

We will review your situation, explain your options, and coordinate with your CPA to build a plan that protects what you have built.

Learn more: - Puerto Rico Trusts - Act 60 Tax Incentives - Estate Planning