Inheritance and succession planning – what do they involve?

“First of all, being a good listener. No two people and no two couples have the same assets, the same family situation, the same lives. Spouses, children, relatives, and ‘significant others’ are involved. Patchwork families, which often include various spouses and partners, half-siblings, step-siblings, and step-parents, add a layer of complexity. And of course, the larger and more spread out assets and families are, the more complicated the inheritance process becomes. So I cannot hand out off-the-shelf solutions. I need to understand the client’s big picture: their wealth, of course, but also their family and their individual situation (e.g. nationalities, place of residence, personal circumstances, and provisions in place). Once I attain a holistic view, I know which other experts from within the bank or from our business partners need to be involved. We can then work with the client and their family to develop a solution which best meets their needs. Death – which is part of inheritance – is a difficult topic. Many people do not like to think about their own demise. But we do this in a gentle, structured way that leads to answers and solutions.”

What is the most common mistake in wealth planning?

“Trying to move too quickly. There is a lot to consider, including the needs of the people involved, the nature of the assets to be transferred, and technical issues of law and taxation. Planning an estate and/or a succession is a process – you need to work through it peacefully, carefully, over time. If all the wealth and involved parties are in Switzerland and relationships are straightforward, clients usually need about three months to reach a solution. If matters are more complicated – e.g. the wealth or the family are complex and spread over various countries and jurisdictions – the process can take up to one year or even longer. This is especially the case in comprehensive planning, which may include matrimonial and inheritance contracts, last wills, and structures (e.g. trusts, foundations, and life insurance).”

What is the pay-off?

“A good example is the experience I recently had with an older couple. They wanted to treat their children equally, and they wanted to avoid disputes. The couple already had more than enough money for their retirement, so they wanted to pass on their unneeded wealth while they were still alive. This is nice, but also complicated, because it involved giving various properties to various children. Who gets the holiday house? Who gets the family home? Who gets the hunting lodge? These are emotional issues, further compounded by the fact that the properties were not equal in value, thus requiring evening out as well. They talked it out as an entire family, and we found a way to allocate the relevant assets and compensate everyone. We discussed and drafted gift and inheritance contracts, which were finally signed in front of the respective notaries. Now parents and children are happy – all is decided and properly planned. We place huge value on building trust with our clients and their children.”

Estate planning for person with residence in Switzerland

There is an understandable reluctancy to deal with the organisation of asset and succession planning for the next generation. Nevertheless, attention should be devoted to estate planning while we are still alive – especially in today’s world, where family relationships can be personally or geographically widely distributed. Here is an overview of the most important legal considerations to bear in mind.

Matrimonial property regime (Swiss Civil Code 181 ff.)

In the event of the death of a spouse, matrimonial property division takes place before the inheritance law comes into play. Swiss law distinguishes between three matrimonial property regimes: participation in acquired property, community of property, and separation of property. By law, spouses are subject to the ordinary property regime of participation in acquired property. However, through the creation of a publicly notarised marriage contract, spouses can choose another property regime or carry out certain changes within an existing property regime. In this way, the amount of the estate that will later be subject to inheritance law can be significantly influenced.

Inheritance law (Swiss Civil Code 457 ff.)

If neither a valid will nor an inheritance contract exists, the estate is inherited according to the provisions of the statutory law. Surviving spouses or registered partners are entitled to a share of the inheritance independent of the matrimonial property regime. Moreover, the law specifies an order of precedence that determines which relatives inherit in which sequence – it draws a distinction between three groups of individuals entitled to inherit (so-called parentela):

• 1st parentela: descendants
• 2nd parentela: parents and their descendants
• 3rd parentela: grandparents and their descendants

A closer parentela excludes a more distant one; this means, for example, that parents have no statutory inheritance claim if the testator leaves behind descendants.

If the deceased does not leave behind any of the above-mentioned heirs and also does not leave any testamentary dispositions, the estate falls to the community.

Estate provision

A testator can change the legal devolution of their estate within the limits of the law by means of a testamentary bequest or a testamentary disposition upon death. One of the limits to this is the so-called reserved share of the estate (a fixed share, which is withdrawn from the disposition of the testator). Dispositions at the expense of an heir’s reserved share can be contested by the latter to the extent of their reserved share of the estate if they have not waived their entitlement in an inheritance contract.

Descendants, spouses, and registered partners are protected by the reserved share of the estate. The reserved share comprises half of the statutory share of the estate. Those who do not leave behind any named heirs protected by reserved shares can dispose of their entire estate upon death without restrictions.