Obviously, there are more exciting topics for a blog post.
However, if you don't get things right in estate planning, the outcome can become devastating.
Today we will guide you through the ruleset of Swiss succession law.
It's merely a domestic overview since international scenarios would add another level of complexity.
Read on to learn more about legal succession, compulsory portions, ways to avoid conflicts, and how the legal framework will look in 2023.
Swiss inheritance law follows the principles of universal succession and acquisition by operation of law.
The heirs acquire the inheritance as a whole upon the testator's death by operation of law.
Subject to the statutory exceptions, the testator's claims, rights in rem, and property will pass to the heirs without further ado and in their entirety.
The testator's debts will become the heirs' personal debts.
This means that the testator's assets do not pass to the heirs separately but as a whole and closed unit.
The inheritance by the heirs takes place by operation of law and without further acts of transfer to pass the estate.
However, there are exceptions to this, which, for example, require an express declaration of acceptance by the heirs.
The legal succession rules apply if a testator has not made an arrangement through a disposition of wealth upon death or has only made a partial disposition.
In such an event, the relatives, the surviving spouse or registered partner, and, subsidiarily, the state are deemed to be the legal heirs.
Depending on the relationship with relatives, their resulting portion of the estate is the so-called statutory share.
The legal system establishes a hierarchy among the relatives into three degrees:
- All descendants of the deceased belong to the first degree. It includes, in addition to the testator's children, their children, and further descendants. This degree contains legitimate, illegitimate, and adopted children.
- Together with their descendants, the testator's parents form the second degree. Thus, the testator's father, mother, brothers, sisters, nephews, nieces, and descendants.
- The testator's grandparents and descendants belong to the third degree. These are uncles and aunts and their descendants.
Only the first three degrees are relevant for legal succession.
In principle, a subsequent degree of relationship only comes into play if no person from the preceding degree is a legal heir.
If heirs are in the first degree, they exclude the subsequent degrees.
If a testator has children, the other degrees are no longer considered for legal succession.
Within a degree, only the oldest generation inherits primarily, whereby all heirs of this generation are treated equally (principle of equality).
If a testator has children and grandchildren, only the children within this degree are considered in equal shares.
If a person of the oldest generation cannot become an heir within a degree, her descendants take her place (principle of entry).
This may be the case due to predecease, disclaimer of the inheritance, disinheritance, or unworthiness to inherit.
If there are no descendants, the other children inherit the same level (accrual principle).
Each degree is divided into stirpes formed by the oldest generation and their descendants.
The law follows the logic of the principles of equality, entry, and accrual. Only if there is no person in the first degree, the second degree is entitled to inherit.
The second degree includes the parents of the testator and their descendants. If both parents are alive, each of the parents inherits an equal share.
If the parents are not alive anymore, their descendants will inherit. If one parent is predeceased, the inheritance accrues to the other parent.
If no descendants of the second degree are entitled to inherit either, the inheritance accrues to the third degree.
The third degree is the last relevant for legal succession. If there are no heirs of the third degree, the inheritance will go to the state.
The third degree includes the grandparents and their descendants.
Again, if all grandparents are alive, they inherit in equal shares. If one of the grandparents is predeceased, her descendants inherit that portion.
If a grandparent is predeceased without descendants, that share will not go to all grandparents equally, but only to the line married to her.
If there are no grandparents or descendants on one line, the entire inheritance goes to the other.
In addition to the legal heirs according to degrees, the spouse or registered partner are also entitled to inheritance.
The marriage is dissolved upon the testator's death, and the matrimonial property settlement is carried out before inheritance issues are resolved.
Depending on the applicable property law, this determines which assets are included in the testator's estate.
Next to the first degree, spouses inherit a quota of 1/2.
If there is a second degree, the spouse or registered partner inherits 3/4 of the estate.
In the event of only a third degree, the surviving spouse or registered partner will inherit the entire estate.
If a testator leaves behind a spouse and a child, the spouse inherits 1/2 next to the first degree. As such, the child will also inherit 1/2 of the estate.
If there are no descendants but the testator's parents, the spouse inherits 3/4 of the estate and the parents 1/4.
Under Swiss law, the testator can only dispose of the estate's disposable portion. The compulsory portion does not reserve this part of the estate for legal heirs.
Such forced heirship rules are typical for civil law countries to reserve a specific estate portion for some legal heirs.
That’s why the rights of certain family members limit the freedom of disposition.
The compulsory portion must accrue to the heirs unencumbered and can not be subject to conditions or requirements.
The following legal heirs have the right to the compulsory portion based on the statutory share as outlined above:
Only descendants, spouses, and parents have the right to the compulsory portion. Siblings of the testator are not entitled to it.
Let's look at a few constellations to clarify the concept:
The compulsory portion is reserved for the heirs who accept the inheritance.
This is not the case if they have failed to acknowledge the inheritance, are unworthy of inheritance, or have been disinherited.
The compulsory portion is further inheritable if an heir dies after the inheritance has accrued.
If a legal heir does not accept the inheritance, her share is inherited by her descendants.
However, a waiver of inheritance is also effective for the descendants.
In disinheritance, the descendants of the disinherited her succeed to the inheritance or the available share increases.
In the case of unworthiness to inherit, the descendants succeed as if the disinherited person had predeceased.
The compulsory portion restricts the testator's freedom of disposal.
A legal heir with a reduced compulsory portion can file a claim for reduction against the disposition's beneficiary.
In other words, it is not the estate but the beneficiary of the disposition who is sued to assert the claim for integration of the compulsory portion.
Legal heirs can challenge both dispositions upon death and inter vivos.
In general, we recommend a structured estate planning process guided by a professional to ensure all dispositions occur within the legal framework.
Wealth owners often overlook a simple and effective way to avoid conflict by involving the family in the estate planning process.
Even with the best intentions and within legal boundaries, family members may not appreciate your plans and resort to courts.
Under Swiss law, you can settle with your heirs in a notarized inheritance contract during your lifetime.
Here, the law allows various design options. In this way, you can assure heirs of their beneficiary status free of charge or against compensation.
The heirs themselves can waive their rights, either gratuitously or for consideration.
Such an arrangement can also be amended over time or even canceled, although in most cases, it requires the consent of all contracting parties.
The following examples show the flexibility of inheritance contracts to solve specific issues:
Instead of leaving the effect of your arrangements to your final day, you can dispose unilaterally of assets during your lifetime.
In particular, if you decide to involve your family in the process, you can achieve clarity and certainty by transferring wealth as long as you are alive.
Since donations to family members are exempt from gift and inheritance tax in most Swiss cantons, you will not have to worry about tax consequences.
Again, you will have to consider the boundaries of the law since, otherwise, lifetime dispositions will be subject to claims of disappointed legal heirs to integrate their compulsory portion.
On January 1, 2023, new succession law provisions will come into force.
This will give wealth owners greater flexibility in their estate planning.
The revision focuses on increasing the testator's freedom of disposal by reducing the compulsory portions. This increases the testator's room for maneuver in two respects.
On the one hand, she can transfer a more significant part of her assets to legal heirs, facilitating family business transfers.
On the other hand, she can benefit other persons more with a disposition upon death - for example, a de facto life partner or children.
However, de facto life partners are granted neither a legal claim to inheritance nor a compulsory portion.
Under the new law, parents will no longer have a compulsory portion, although they remain entitled to their statutory share if there is no disposition upon death.
Couples without children can now exclusively benefit each other in their last will without considering their parents.
The compulsory portion of descendants will be reduced from 3/4 to 1/2 of the statutory share.
Testators under the new rules will have more options since they can dispose of at least 1/2 of their estate even if they are married and have children.
Here's how things will look in the future:
In addition, the freedom of disposal is also increased if testators die during ongoing divorce proceedings or an ongoing dissolution of the registered partnership.
In this case, with a specific order in the last will, the compulsory portion of surviving spouses or registered partners can be excluded.
In the absence of the last will, they remain entitled to their statutory share.
Testators will have more flexibility to transfer wealth to other beneficiaries, dispose of real estate entirely and ensure succession in family businesses easier.
You'll most probably agree that estate planning is no do-it-yourself exercise if you have been reading until here.
Especially if you want to transfer real estate, a family business, securities, and valuables, it might not be easy even for an expert to design a sensible distribution after your lifetime.
The settlement can take years, trigger conflicts, and destroy family wealth.
Therefore, our most important advice in this context is to start estate planning early enough and involve your family.
This applies not only to Swiss succession law but also globally.
09-02-2022