Summary: Swiss inheritance law shall be modified in accordance with the latest social forms of living together. In particular, the Swiss Federal Council proposes to reduce the compulsory parts for descendants so that testators can dispose of their assets more freely. For example, they can better benefit their life partners. Succession planning for family businesses and companies, including holdings, would also be easier. A hardship regulation is also intended to protect the de facto life partners from poverty after a death. The Swiss Federal Council adopted the respective legislative proposal at its meeting on 29 August 2018 for the attention of the Parliament.
In Switzerland, approximately one quarter of family households with children under the age of 25 are no longer in the traditional family form: many people live in patchwork families, in factual partnerships with common children or in families with single mothers or fathers. As in all countries, inheritance laws play a significant role in Switzerland in an economic and social respect: Around two-thirds of the population have already inherited or are expecting an inheritance. Overall, the annual inheritance volume is higher than the annual savings of households, whereas according to estimates, the inheritance volume in 2015 was approximately CHF 63 billion.
- Changes with respect to the statutory entitlement / compulsory parts (“Pflichtteil”)
Under the present Swiss inheritance law, children, spouses or registered partners or, in certain cases, parents have a right to a minimum of the inheritance, protected via the so-called statutory entitlement or compulsory parts (that is also known in other jurisdictions). According to article 471 of the Swiss Civil Code in force, the statutory entitlement is (1) for every descendant, three-quarters of his/her statutory succession rights; (2) for each parent, one-half; and (3) for the surviving spouse or registered partner, one-half.
The main core of the revision is a reduction of these legal compulsory parts for the descendants, whereas the mandatory part for parents should be completely eliminated. Thus, the testator can dispose more freely of his assets and thus, for example, support de facto life partners or life partners or their children more significantly. Also, the Swiss Federal Council plans to have the claim of the surviving person be waived in principle if a person dies during divorce proceedings or during proceedings for the dissolution of the registered partnership. In doing so, the Swiss Federal Council wants to take account of the manifest will to dissolve and eliminate factual incentives for a tactical delay in the divorce proceedings or the process of dissolution of the registered partnership.
- Succession planning especially with respect to family business
The reduction of compulsory parts also facilitates succession planning for family businesses, which should have a positive effect on the stability mainly of family companies and secure jobs. As of today, due to the rather high part of the statutory entitlement, the descendants who have taken over shares during the lifetime of their parents in order to continue to run a business, mostly at a favourite price or as an advance against inheritance, see themselves faced with high compensation claims (most often based on a fair value determination) by their siblings at the moment of the partition of the inheritance. In case not all siblings formally agree to a ‘company-first’-approach in the succession planning (which is not always the case), the current law has forced successfully operating successors in a business to sell or pledge shares in order to pay-out their siblings. This is an unwanted consequence of inheritance law which might compromise the independence of a family businesses at a random moment and, thus, brings unwanted complexity to business continuity planning. The reduction of the statutory entitlement allows for a more long-term succession planning in family businesses.
- Support claim for de facto life partners
For de facto life partners who are in financial distress after the death of their partner, the Swiss Federal Council is proposing a so-called support claim. This new instrument is intended to better protect the life partner from poverty and prevent them from having to rely on social security assistance, however such new instrument of entitlement to support should be the exception and act only as long as necessary to prevent poverty.
- Further issues
In addition, the revision is intended to clarify further open questions in the determination and calculation of the estate’s assets, such as for example, the law should expressly state that tied self-provision (so-called “Pillar 3a”, as specific form of tax-beneficial saving) shall not part of the estate’s assets, but is subject to reduction in the case of breach of compulsory portions. The same applies to prenup agreements or property contract under which, in terms of property, a jointly held property is to be transferred in full to the surviving spouse or to the registered partner.