Reduced Compulsory Share
The descendants’ compulsory share was reduced from ¾ to ½ of the statutory share of inheritance and the parent’s compulsory share was abolished. The statutory share of inheritance is partly formed by the compulsory share. This ensures that certain relatives are granted a minimum participation in the estate. The surviving spouse or registered partner’s compulsory share remains unchanged (½ of the statutory share of inheritance).
- As testator, you can now freely dispose of at least half of your estate. For example, you could give your half to an heir or benefit a third party.
- This added flexibility is worth considering in your estate planning, as more flexibility is now at your fingertips to define the beneficiaries of your estate. Further, this is particularly important if you have your own business which you wish to be carried on by certain persons.
- Note that to benefit from these new freedoms, you must make the necessary arrangements in your will or inheritance contract during your lifetime.
Higher Inheritance Quota for the Spouse and Usufruct
Previously, spouses with joint descendants could allocate up to ¼ of the estate to the surviving spouse and ¾ of the estate to the joint descendants for usufruct. Under the revised law, the spouse may be allocated half of the estate as an inheritance share with the other half set aside for usufruct.
- Again, this change of law allows for more freedom and flexibility regarding the arrangements of you and your spouse’s inheritance.
- Active estate planning is required to benefit from this new freedom; thus it is recommended to review your existing will and/or inheritance contract.
Restriction of Gifts
Under the revised law, the permission of new gifts is limited after the inheritance contract’s conclusion. In turn, later gifts may be contested. Naturally, common occasional gifts are excluded from this rule.
- Ensure that your inheritance contract stipulates gifts to descendants and/or to other persons after its conclusion.
- To minimize contestability, consider fixing the number of gifts by attaching a condition in your inheritance contract to cover the period after the contract’s conclusion.
The Spouse’s Protected Share in Divorce Proceedings
Under the revised law, spouses are no longer entitled to a protected compulsory share once divorce proceedings are initiated. Previously, spouses only lost this entitlement upon a final divorce/dissolution decree.
Note that the spouse’s right to a share in the estate holds until the divorce/dissolution order is finalized. To entirely remove the spouse’s right to inherit during pending divorce proceedings, an appropriate testamentary disposition is necessary, without which the spouse retains their legal entitlement to the inheritance. Initiating divorce proceedings alone will not suffice to remove a spouse’s inheritance rights.
If a spouse/partner dies while divorce proceedings are pending, they lose their entitlement to the compulsory share in two scenarios:
- Divorce proceedings were initiated at a joint request or continued at a joint request in accordance with the divorce provisions; or
- The spouses lived separately for at least two years.
- If divorce proceedings are pending and you wish to reduce or eliminate your (estranged) spouse’s inheritance share, an appropriate testamentary provision is necessary.
Treatment of Pillar 3a
The revised law clarifies the treatment of pension assets in Pillar 3a institutions, explicitly stating that Pillar 3a pension assets do not form part of the estate. Consequently, the beneficiaries receive Pillar 3a pension assets without needing the heirs’ consent.
- While the order of beneficiaries is dictated by social security law, it is recommended that you outline the order of beneficiaries deposited with the pension fund in your will/inheritance contract.
It is also worth noting that Pillar 3a pension assets are taxed separately from other income and at a reduced rate. Additionally - and in contrast to inheritance taxes - the degree of kinship is not influential here.
On a side note, Pillar 2 savings will not be impacted by the revised law.
The Future of Family-Internal Company Succession
The flexibility of company succession – especially in a family-internal context – is improved thanks to the reduced compulsory share. To further facilitate family-internal company succession, the Swiss Federal Council submitted a legislative proposal to Parliament on June 10, 2022. Below are two notable provisions included in the proposal:
- An heir can take over the company even if the testator has not made a disposition to this effect.
- Upon request and under certain conditions, courts can assign the company to an heir.
The proposal aims to prevent the dismantling and closure of SMEs caused by unfortunate stumbling blocks present in Swiss inheritance law. The Federal Council estimates that these shortcomings cause financial problems for approximately 3400 companies every year. Therefore, keeping an eye on how this proposal develops is advisable.
Your existing wills and/or inheritance contracts remain valid under the newly revised inheritance law. Considering the new provisions, it is sensible to review your existing wills and/or inheritance contracts to avoid any awkward contradictions or missed opportunities for improved estate planning.
The revised Swiss inheritance law is a welcome change, creating new estate planning possibilities for testators. However, the changes do not automatically take effect and thus as testator, you need to make the necessary arrangements during your lifetime to benefit from the new provisions.
For further assistance on your estate planning, please contact us below.