Arlington, VA asked in Estate Planning, Real Estate Law, Tax Law and Probate for Puerto Rico

Q: My mom wants to gift her PR home to me (her only heir). What tax/other issues should I be aware of?

My mother is a PR resident (I am not), and wants to gift her home to me before she remarries or dies. She also said she may want to still live in the home after she gifts it to me. She said she would gift the title, but still have it enscribed in her name. I want to accept her kind gift, but I am so confused. Is there a difference between having the title and “enscribing” the home? What tax/liability or other issues should I be aware of? This will not be my primary residence. Thank you!

1 Lawyer Answer
Rafael  Pagan-Colon
Rafael Pagan-Colon
  • Probate Lawyer
  • San Juan, PR
  • Licensed in Puerto Rico

A: First off, unless your mother donates the property to you by way of a deed the Property Registry would still register the real estate in her name. Once she transfers the property in fee simple to you, it needs to be inscribed in your name by filing a certified copy of the donation deed and of your acceptance with the Property Registry. The Registry will not recognize you as owner of the title unless said title has been inscribed (filed). Nevertheless, your mother can legitimately retain the right to dwell in said real estate property for the rest of her life, as a condition to the donation. This right would also be inscribed in the Property Registry.

Second, in order to file the donation deed, you need to (a) physically appear to the donation deed's subscription, in order to accept the donation; (b) appear by way of a power-of-attorney to the donation deed's subscription; or (c) subscribe a donation acceptance deed poll, prior to register the donation and change of ownership title in the Property Registry.

Finally, regarding tax considerations, the Municipal Incomes Collection Center ("CRIM", by its Spanish acronym) is the government entity in charge of collecting property taxes. So long as your mother lives the house, she's entitled to a tax exemption of up to a property value of $150,000. If and when she dies, if you are not living the property as a primary residence, the exemption will end and the real estate property will begin to accrue property taxes from the moment neither your mother nor you lives at the property.

Donations do not pay taxes after January 2018; so long as the donated real estate property remains in your patrimony. When filing with the Property Registry, the donation will be valued at the historic price at which your mother acquired said real estate property, pursuant to the Puerto Rico Tax Code. Should you later decide to sell said real estate property, capital gains would be determined as the difference between this historic value and your sales price. Being a non-resident of Puerto Rico, the notary who authorizes the sales deed will need to retain 15% of the capital gains, to deposit with the Puerto Rico Treasury Department at the time of the sale, pursuant to the Puerto Rico Tax Code.

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