Newsletter on the revision of Swiss inheritance law
Revision of inheritance law
Reto Strittmatter and Lara Gachnang discuss in our latest newsletter the revised provisions of the Swiss inheritance law and give recommendations for action. The revisied provisions will enter into force on 1 January 2023 and will also apply to all existing wills and inheritance contracts.
The new law offers a greater flexibility than its predecessor. In the future, testators will have the freedom to alloctae a larger portion of their estate as they wish. The revision also addresses several issues that have been contentious under the current law. The most important changes are outlined below.
1. Changes to the compulsory portions of descendants and parents
Under the current law, descendants, spouses, registered partners, and, in certain cases, parents are entitled to a minimum share of the estate (the compulsory portion). The new law regulates the compulsory portion as follows:
The compulsory portion for descendants is reduced from 3/4 to 1/2;
The compulsory portion for spouses and registered partners remains unchanged at 1/2;
The compulsory portion protection for parents is abolished.
The basis for calculating the compulsory portions is the statutory inheritance entitlement, which remains unchanged under the new law.
Examples:
Mr. Muster leaves behind his wife and three children. He has made a will and allocated a compulsory portion to his children. The statutory inheritance entitlement for his wife is 1/2, while each child is entitled to 1/6. Under current law, his children each receive 3/4 of 1/6, i.e., 1/8 each. Under the new law, his children each receive 1/2 of 1/6, i.e., 1/12 each.
Mr. Muster did not make specific provisions for his estate in his will, meaning the statutory succession applies. His wife receives 1/2 of the estate, and his children each receive 1/6. This remains the same under both the current and the new law.
The reduction or elimination of the compulsory portions increases the freely available share of the estate. As a result, de facto partners, stepchildren, other close relatives, charitable organizations, or individual heirs can benefit to a greater extent than before. Childless spouses and registered partners can now designate themselves as the sole heirs without restriction.
It is important to consider the potential tax implications (inheritance tax), which can vary significantly depending on the canton. These taxes can be substantial, especially when non-relatives receive preferential treatment.
2. Loss of the Right to the Compulsory Portion in Divorce or Dissolution Proceedings
Under current law, spouses and registered partners lose their inheritance and compulsory portion entitlement only upon the issuance of a final divorce or dissolution decree.
Under the new law, the following applies: If divorce proceedings are pending at the time of the testator’s death, the surviving spouse loses their right to the compulsory portion if the proceedings were initiated or continued by mutual consent, or if the spouses have been living separately for at least two years. This provision also applies, mutatis mutandis, to proceedings for the dissolution of a registered partnership.
Upon the filing of a divorce or dissolution petition, which results in the loss of the surviving partner’s compulsory portion, any claims arising from bequests or provisions in prenuptial or property agreements are revoked, unless stated otherwise.
It is important to note that the statutory inheritance entitlement remains in effect until the final divorce or dissolution decree. If the surviving spouse or registered partner is to inherit nothing in the case of pending divorce proceedings, a corresponding provision in the will (i.e., active action) is required.
3. Usufruct in favor of the surviving spouse or registered partner
Under current law, the testator may grant the surviving spouse usufruct over the entire portion of the inheritance that would otherwise go to the joint descendants. This usufruct replaces the statutory inheritance rights of the surviving spouse alongside the descendants. In addition to this usufruct, the testator’s freely available share is 1/4 of the estate. Under the new law, this share is increased to 1/2 of the estate. Furthermore, it is specified that this option for benefiting from usufruct also applies to registered partners.
4. Easier Challenge of Gifts Made After a Will Agreement
Under current law, it is unclear whether a testator may dispose of their estate through inter vivos gifts after the conclusion of a will agreement. According to the Federal Court, such gifts are permissible as long as the will agreement does not contain a contrary provision and there is no obvious intent to harm the heirs.
Under the new law, inter vivos gifts made after the conclusion of a will agreement—unless they are merely token gifts—are inherently subject to challenge, unless the will agreement explicitly permits such gifts. This new regulation also applies to will agreements concluded before the enactment of the inheritance law revision, provided the testator passes away after December 31, 2022.
5. Clarifications
a) Overhalf Proposal Allocation
The new law clarifies that any portion of the proposal allocated to a spouse or registered partner exceeding half, as stipulated in a prenuptial or property agreement, will not be factored into the calculation of the compulsory portions for the surviving spouse or registered partner, the joint children, or their descendants. Non-common descendants, on the other hand, are still not obliged to accept such a proposal allocation if it infringes upon their compulsory portions.
b) Locked Retirement Savings (Pillar 3a)
Under current law, there is uncertainty regarding whether Pillar 3a bank savings are considered part of the estate or if the beneficiary holds an independent claim against the pension provider. The new inheritance law provides clarity, stating that Pillar 3a savings do not form part of the estate. The beneficiary can directly request payment from the pension provider, and the consent of the heirs is not required.
However, claims from Pillar 3a are included in the estate calculation for the compulsory portions (the full value for bank savings and the surrender value for insurance savings). Benefits from occupational pensions continue to be irrelevant when calculating inheritance and compulsory portion claims.
c) Reduction
Heirs who receive less than their compulsory portion in value can request that certain dispositions of the testator be reduced to the permissible amount. Under current law, it is not entirely clear which dispositions of the testator can be reduced, and there is uncertainty regarding the order of reduction. The new law clarifies that acquisitions according to the statutory inheritance order should be reduced first (i.e., the inheritance share of statutory heirs down to their compulsory portion). Then, reductions will apply to bequests made by the testator, followed by reductions to lifetime gifts.
6. Further legislative procedures
Further legislative procedures are already underway in the area of inheritance law. In particular, a separate corporate inheritance law is to be established to facilitate business succession. Additionally, the inheritance provisions of the Federal Act on Private International Law (PILA) are to be aligned with the European Inheritance Regulation.
7. Need for Action?
No transitional provisions have been established for the introduction of the new regulations. As of January 1, 2023, the new law will apply to all existing wills and inheritance agreements created under the previous legal framework. We suggest that you review the following points:
Is my will or inheritance agreement in alignment with the new regulations?
Are any clarifications necessary in my will or inheritance agreement due to the new provisions?
Do I wish to designate a new or increased beneficiary?
We would be pleased to assist you in reviewing these matters and are available for a consultation.