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, which are scheduled to be implemented in 2023.
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 carry out a revision of inheritance law. The intention is to take modern forms of cohabitation, such as blended families, into account in the future, as well as to give testators more freedom when planning their estates. The changes will take place in stages, the first of which has already been definitively agreed. The first stage will encompass a reduction of compulsory portions, and will enter into force on January 1, 2023. The other stages pertain to technical points and a simplification of corporate succession for family-run businesses; a final decision has not yet been made for these stages.
Stage 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 stage, the compulsory portion inherited by children has now been reduced. Instead of three-quarters of the legal inheritance entitlement, this portion will now total only half. The compulsory portion entitlement for parents is being eliminated entirely. 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. 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 regime, in cases where descendants are involved, the freely disposable portion is now half of the estate instead of a quarter as it was previously. Overall, the new succession law will therefore lead to greater freedom for testators. This allows them to leave greater inheritances for individual beneficiaries such as a life partner’s children from their first marriage.
Existing wills and inheritance contracts will remain valid as a general rule, 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.
Stage 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 stage, 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
During the 2020 winter session, the Federal Assembly held multiple discussions on Stage I and adopted the modified legislative texts by a clear margin in the final vote on December 18, 2020. After the April 10, 2021 referendum deadline expired without being used, the Federal Council decided on May 19, 2021, that this stage of the revision of the law of succession will enter into force on January 1, 2023. The revised provisions will apply for all deaths starting from the date of the entry into force. This applies regardless of whether a will was drawn up or an inheritance contract was concluded before the revision's entry into force. Since the legal wording for the first stage is now fixed, it is already possible to adapt inheritance planning in accordance with the new situation.
During the course of this year, the Federal Council is expected to present the stage on corporate inheritance law to the Federal Assembly. In this context, the Federal Council will take the results of the consultation process concluded in February 2020 on the simplification of corporate succession into consideration.