Estate: Plan in good time!
May 2021
Plan your estate in time!
Human life is transient. Death has been the constant companion of us humans for centuries. In our enlightened times, which are full of life, this banal fact is often suppressed. The Corona pandemic, however, has brought this basic truth back into focus with all its force.
The main regulations on the subject of inheritance can be found in the Swiss Civil Code (ZGB), particularly in Art. 457ff (law of succession) and, in the case of married persons, additionally in Art. 181ff (matrimonial property law). In addition, numerous other sources of law play a role (property law, contract law, tax law, insurance law, etc.) and, in the case of international relationships, the relevant conventions and foreign law must also be taken into account. In complex situations, it is advisable to seek expert advice in good time.
Good in principle
The Civil Code was drawn up in its original form over 100 years ago (the CC came into force in 1912). The forms of cohabitation, the rights of men and women and moral concepts have changed considerably since then.
Marriage and inheritance law has been revised several times over the last hundred years and adapted to changes in society.
Nevertheless, I am always forced to respect the enormous achievement of the legislator at the beginning of the 20th century! To shape a complex, materially incisive and often very emotional subject such as the law of succession with a few regulations in such a way that it leads to satisfactory results for the majority of situations and, moreover, to provide instruments that can be used flexibly for special situations is admirable.
From the field: When all comes well
A client, let's call him Fritz, whom we have been serving for about three decades, died unexpectedly last year after a routine hospital procedure. He was wealthy and leaves behind two children and siblings. His wife passed away several years ago.
Even during his lifetime, Fritz repeatedly made advance inheritance payments to his children.
Fritz had concluded a marriage and inheritance contract with his wife, as well as an advance directive and a living will. However, there is no will.
The only legal heirs are the children, who get on well together. They inherit their father in equal shares and will divide the estate among themselves. Special arrangements under inheritance law were not necessary, as the legal regulations also correspond to Fritz's will.
In these cases you should take action
However, there are situations where you should consider making your own arrangements, e.g.
- cohabitation
- Presence of (non-common) children
- Presence of large assets
- Unequal financial circumstances of the partners
- Financial dependence of a partner
- business activity
- Concentration of assets in companies or real estate
- Cross-border relations
A wide range of options is available to you for this purpose: Wills, marriage and inheritance contracts, gifts, insurance solutions, etc. As these are very important arrangements, the legislator has in some cases bound them to formal requirements that must be complied with.
From the practice: Inform openly!
A few years ago, a client, let's call him Emil, for whom we did the accounting, had appointed us as executors of his will. He was a widower and lived in cohabitation with his partner. Emil had entered into a marriage and inheritance contract with his late wife, a copy of which we had received. In a new will, he appointed his legal heirs to the compulsory portion and his partner as sole heir.
The marriage and inheritance contract, from the 1970s, had been typed by the notary. As it turned out after Emil's death, he had only given us and his partner an incomplete copy of his marriage and inheritance contract. The last section on one page, in which the nephews and nieces of the spouses were beneficiaries, was presumably covered on the copy!
After Emil's death, the notary's office filed the (complete) marriage and inheritance contract with the district court. The nephews and nieces were contacted as legal heirs and objected to the issuance of a certificate of inheritance requested by the civil partner. Ultimately, the parties reached a settlement in court.
Tip: Put all your cards on the table right from the start!
From the field: Get to work!
A client, let's call him Max, has appointed us executors of his will. He lives with his second wife in Switzerland. Both spouses have brought children into the marriage from their first marriage. Apart from their own apartment, which belongs half to each of the spouses, there are no other assets worth mentioning.
Since legal heirs must compensate for gifts and advance inheritances, a gift does not provide a satisfactory solution. The granting of a right of residence at least ensures that the surviving spouse remains in his or her own four walls. However, the compulsory portions of the non-joint children are not yet compensated and can overtax the financial possibilities of the surviving spouse.
As all the children are in good circumstances and there is good understanding between them and their parents, the situation and wishes should be openly explained. If the children could be convinced in principle to renounce their inheritance, this would do much to reassure Max and his wife.
Tip: Talk about the situation and your wishes with those around you early and openly. The first step is the hardest, but it is worth it!
Where the journey goes
The Federal Council would like to modernise inheritance law so that it is better suited to new forms of cohabitation (patch-work families, families without a marriage certificate) and single parents.
The compulsory portions are to be reduced (descendants) or abolished altogether (parents) in order to give the testator greater room for manoeuvre. It is indeed questionable why, for example, a son who inherits his father at the age of 70, who himself lives in wealthy circumstances and who has had no further contact with his father over the past decades, should be protected in his inheritance entitlement with a high compulsory portion (3/4; new proposal: 1/2). (Spouses and registered partners should continue to be entitled to a compulsory portion of 1/2).
With lower compulsory portions, the share that a testator can freely dispose of increases. For example, children in a patchwork family can be better protected. There is also greater scope for business succession, although special options are to be created for this area.
A hardship provision is intended to provide better protection against poverty for de facto partners of a deceased person.
The Federal Council's Dispatch II on the revision is expected to be adopted in the course of 2021. However, the revised inheritance law is not expected to enter into force until 2022 at the earliest.
Conclusion
Think about what should happen to your assets in the event of your death. Get an overview, e.g. by means of your tax return.
Are the legal regulations such that they correspond to your wishes or do you need to take additional, individual measures (will, marriage contract, inheritance contract, insurance solutions)? You should also think about yourself: What happens if your partner dies before you? Are you sufficiently covered in such a scenario?
Make provisions for the event that you lose your capacity to act (advance directive). Do you wish to receive medical care and how far should this care go (living will)? Do you have any wishes for your funeral? Make sure that the person you trust knows where to find the documents.
Discuss your wishes with your relatives. They can still respond to questions and arguments now and make appropriate arrangements if necessary.
Whatever you are planning: make it happen!
Sources:
Swiss Civil Code
Federal Council wants to modernise inheritance law
Disclaimer: This publication is provided to users for information purposes only. In case of disagreement, one has to refer to the cited sources, relevant laws and publications alone. This letter contains a strong summary assessment by the authors. For an individual clarification of the respective facts, please contact us or the relevant authorities directly.
Honold Treuhand AG
Status May 2021