conflict free bequests planning inheritance early pays off

Making bequests without conflict. The way to manage inheritance.

With testaments, marriage contracts, inheritance contracts, and other arrangements, it's easy to plan every inheritance according to your own wishes. Richard Wälti, Credit Suisse expert on inheritance law, explains the most important terms in this interview.

When two people fall in love and get married, contracts aren't the first thing that come to mind.

You're talking about romance and common sense (laughs). There must be a place for both. At some point in your daily life, you will be confronted with the legal and financial aspects of the conclusion of a domestic partnership.

What exactly does that mean?

Swiss marital property and inheritance law allows for a certain level of flexibility. Ideally, it allows for the best possible coverage of the spouses' needs, and for the corresponding protective options to be arranged in the event of death or divorce.

It's easy for spouses to set up marriage and inheritance contracts on their own schedule, for example at home after supper.

Templates are available online. However, contracts like these must be notarized. As long as both spouses agree, contracts can be adjusted at any time.

What about cohabitation?

Similarly to a marriage contract, a cohabiting partner contract makes it possible to clearly and transparently structure both partners' financial claims upon dissolution of the domestic partnership.

In addition to the marriage contracts, elements of inheritance law can also be combined.

The legal structure for individual cases can be very complex. For this reason, professional advice is recommended in many cases. Important factors for this include family background, professional and financial aspects, individual preferences for coverage, and the goals of the spouses.

And if no one does anything...

...the statutory marital and inheritance law applies to the couple automatically. With individual contracts, however, you can take advantage of the leeway for structuring more effectively.

Can you give an example?

When a parent passes away, the children hold a claim to the inheritance. However, if the descendants are of age, it can be contractually agreed with them for all of the marital assets to remain with the surviving parent for the time being. The descendants will receive the inheritance once the second parent passes away.

It is important to keep sight of reality from the very beginning of the marriage. ... One thing is clear: Trust is good, but the written form is better.

In theory, everything sounds simple and straightforward. Today, however, complicated family arrangements are becoming more common.

As such, it is all the more important to establish a statement of interpretation at an early stage, and to discuss practical solutions with the involved parties for how various inheritance claims can be ensured in the event of a death. Restricting yourself to the statutory inheritance law alone can frequently lead to serious disadvantages.

Inheritance issues can often lead to stark disagreements, even among the closest families.

For this reason, it is important to keep sight of reality from the very beginning of the marriage. Statistics show that one of every two marriages in Switzerland ends in divorce. One thing is clear: Trust is good, but the written form is better. It's much easier to prepare for a crisis while you can still talk to each other about it.

Many want to provide coverage for their closest relatives even during their lifetime.

In the past, assets stayed with parents for longer. Today, many parents are helping their children earlier during capital-intensive stages of life, such as buying property. In such cases, the inheritance is reduced accordingly at a later point.

What if there are two or three children?

When you discuss donations, advancements, or loans with descendants, this topic must be discussed transparently with all participants. 

Company succession is one of the biggest problems.

In practice, we frequently observe that owners of businesses wait too long to address corporate succession. Doing nothing is a common strategy when people don't want to confront an unpleasant topic like their own death. I know of one case in which a business owner with dementia needed to be forcibly removed from the Board of Directors by the adult protection agency. Situations like this create substantial uncertainties for all involved parties.

One frequently hears that older married couples would like... sell their house and move into an apartment or retirement home. For example, you can transfer property to children during your lifetime, and simultaneously agree on rights of residence or usufruct. For larger properties, two-generation households can also be an option under certain circumstances, allowing children to possibly assume care services for their elderly parents. However, it is extremely important to clarify and contractually implement all of these needs while both parents still have the full legal capacity to act.

The person in question can set out everything clearly – but it is also possible to designate a closely associated person to act as a representative in the event of a loss of decision-making capacity.

What does that mean in reality?

The new adult protection law has been in effect since January 1, 2013. It strengthens personal self-determination, making it possible for the first time to use an advance directive to make a binding declaration of who should assume one's legal affairs as a representative in the event of an accident or serious illness.

What exactly does this update mean in practice?

If someone does not specify anything, the adult protection agency will act in this capacity ex-officio. It clarifies whether the person concerned requires a conservator. For example: Under current practice, the spouse of a partner suffering from dementia would not be able to simply sell a jointly purchased house single-handedly.

Which aspects are subject to the advance directive?

It can encompass personal and/or financial care. In the first case, this concerns the arrangement of day-to-day affairs; in the second, it involves the management of assets and the settlement of other financial affairs, such as tax issues. This makes it possible for the subject to independently control all critical issues and autonomously appoint an associated person to represent them according to their wishes. It is also advantageous to promptly specify an investment strategy with the financial advisor and the appointed trusted person.