A revision to the law of succession: increased self-determination regarding your estate
The anticipated revision to the Swiss law of succession promises increased self-determination regarding your estate. The current law of succession came into force over 100 years ago and is no longer fit for purpose. We explore the legislative changes planned by the federal government.
A revision to the law of succession: A new succession law for Switzerland
As the Swiss law of succession is no longer suited to current family and living situations, the federal government is planning to revise it. The intention is to take modern forms of cohabitation into account in the future, including patchwork families and de facto life partners, as well as to give testators more freedom when planning their estates. The changes are in two stages; one stage will lower compulsory portions, the other will deal with technical points such as simplifying corporate succession for family-run businesses.
Message I: Reducing the compulsory portions for inheritance increases self-determination
Currently, a large proportion of what you leave behind necessarily goes to your family when you die because the law sometimes dictates high compulsory portions. In the first message to the Federal Assembly, the Federal Council advised reducing the compulsory portion inherited by children. Children currently receive three-quarters of the legal inheritance entitlement, but the recommendation is for this entitlement to halve. The parents of the deceased will lose their inheritance entitlements altogether. However, the compulsory portion of the inheritance for spouses and registered partners will remain at half of the statutory share of inheritance.
Couples who are neither married nor living in a registered partnership – also known as de facto life partners – have no claim to inheritance under the current law and this will not change. De facto life partners must continue to actively manage the devolution of their estate to ensure that their partner is a beneficiary. Under the new inheritance, however, the freely disposable portion is now half of the estate instead of a quarter previously. The new inheritance law is only intended to create a legal support claim in cases of hardship. However, the Federal Council advises that this should only apply if the de facto life partner is in financial hardship after the death of their partner. Overall, the new succession law would lead to a higher freely disposable portion and thus more freedom for testators. As a result, testators would be able to leave more of their estate to a specific beneficiary, such as de facto life partners or children from previous marriages.
Existing wills and inheritance contracts remain valid, which may lead to sensitive issues in individual cases; particularly where certain phrases in the estate planning suggest that the testator would have mandated differently as a result of the revision to the law. The revision being discussed offers the opportunity to reconsider – and, with majority approval – adapt existing estate planning.
Message II: Simplified succession management thanks to new law of succession in Switzerland
The current law of succession means that family-run companies often have to be broken up when the owner dies. Successors often have to pay high sums as a result of dividing the inheritance protected by compulsory portion law, which can endanger the future of the company.
In a second message, the Federal Council therefore wanted to incorporate various technical points that would lead to clarifications regarding estate planning and the division of inheritance for family-run businesses. Among other things, the successor to the company should be able to be granted a payment delay by the co-successors, in order to prevent liquidity problems. In so doing, the Federal Council wishes to contribute to a higher stability of small and medium-sized Swiss enterprises in particular, as well as to preserve jobs.
A revision to the law of succession: The current situation and what happens next
As the first stage of the revision, Message I from the Federal Council was adopted by the Federal Assembly in August 2018. The Councils advised on the matter. In a further step, the Federal Council opened a consultation process until the end of August 2018 aimed at simplifying corporate succession. The Federal Council published the results of this in February 2020 and will incorporate their findings in Message II. This will be submitted to the Federal Council in early 2021 by the Swiss Federal Justice and Police Department (EJPD). Therefore, the Federal Council will probably adopt Message II at some point in 2021. The changes to the legislation are not expected to come into force before 2022.