Jakob Zuber, Senior Sales Manager Inheritance Consulting, Private Banking
First stage of the revision: Changes to compulsory portions mean greater freedom
The first stage of the inheritance law revision entered into force on January 1, 2023. The main objective of this first stage of the revision was to bring the provisions of inheritance law into line with today's life circumstances and family situations. The amended inheritance law is guided by modern forms of cohabitation and gives the testator greater leeway in terms of estate planning.
The changes to the compulsory portions therefore lay at the heart of the revision. The smaller compulsory portions under inheritance law allow for greater self-determination – particularly for couples who are not married and for patchwork families. Rather than three-quarters of the legal claim to an inheritance, the entitlement for direct descendants will now only be half. Parents will no longer be entitled to a compulsory portion. The compulsory portion for spouses and registered partners will be unchanged and account for half of the legal claim to inheritance. However, the surviving spouse will lose their claim to a compulsory portion as soon as divorce proceedings are initiated rather than when the formal, legally binding divorce decree comes into effect. Following the changes to the compulsory portions, the disposable portion will now be at least half of the estate – irrespective of individual circumstances.
Further changes will essentially be aimed at the creation of legal certainty with respect to the processing of inheritance and estate planning.
Review of current estate planning: New flexibility should be actively used
As there is no change in the legal devolution of the estate itself and existing estate planning likewise remains valid, entrepreneurs need to actively implement this new flexibility. The reduction in compulsory portions will result in a greater disposable share, although this requires corresponding explicit expressions of will. Therefore, corresponding marriage contracts, last wills, and inheritance contracts will need to be set up, or existing documents potentially replaced/supplemented.
As before, couples who are neither married nor living in a registered partnership – also known as de facto life partners – have no mutual claim to inheritance and this will not change when the revision enters into force. De facto life partners must continue to actively manage the devolution of their estate to ensure that their partner is a beneficiary.
Existing wills and inheritance contracts remain valid following the revised inheritance law, 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 current revision is a good opportunity to address your own estate planning or review your existing arrangements and adapt them if required or if you wish to do so.
Finally, we would point out the importance of considering the potential tax implications when drawing up succession management plans. If you intend to make greater provision for particular individuals, the inheritance tax implications need to be included in your considerations based on the degree of relationship or absence thereof (see "Overview of inheritance and gift taxes" PDF).
Second stage of the revision: Simplified succession management for family firms
The current law of succession means that family companies often have to be broken up when the owner dies. Successors frequently have to pay high sums to those heirs entitled to compulsory portions as part of the division of the estate, which can lead to serious liquidity problems.
So the plan for the next stage of the revision was to create additional opportunities that will make succession management easier still for family firms. Four key measures have been planned, according to the Federal Council's preliminary draft: the right to assign the entire company to a single heir as part of the division of the estate; possibility of deferred payment in the event of liquidation problems for the corporate successor; setting of specific rules on accepted value; and introduction of new safeguards for non-acquiring heirs protected by compulsory portion law. This change should ensure greater stability for Switzerland's small and medium-sized companies in particular and secure the jobs they provide. Parliament has been discussing the Federal Council's proposal since June 2023. While the National Council affirmed the need for an inheritance law for entrepreneurs, the Council of States twice decided not to act on the proposal and did not take it any further.
What's staying the same?
The first stage of the revision already brought greater flexibility in relation to compulsory portions as of January 1, 2023. But there will be no specific provisions for company succession. Given that succession planning remains one of the biggest challenges within a company, the failed second stage of the revision should be used as an opportunity to draw up inheritance regulations or review an existing regulation. Credit Suisse succession specialists will be pleased to assist you with this. Please contact your client advisor in this regard.
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