Inheritance law revision – greater freedoms ahead? Inheritance law revision – greater freedoms ahead?

The Council of States has approved revisions to Swiss inheritance law, the main emphasis of which is on giving testators more freedom: they will be able to decide what happens to at least half of their estate in the future. If approved by the National Council as well, the new legislation could go into effect in 2021.

The main features of Swiss inheritance law have remained unchanged for the last 100 years. Societal relationships and lifestyles, however, have not. Not only are people living longer, but their living arrangements have changed to include common law spouses and patchwork families. On top of this, social security systems now give heirs greater security than in the past.

These are reason enough to adjust the country’s inheritance law to better reflect the realities of modern-day life. The Gutzwiller motion first got the ball rolling in 2010. The Council of States just heard the draft bill for the first part of the inheritance law revision on 12 September 2019. There is a chance that the bill could be adopted by the National Council in 2020 and that the amendment would enter into force in 2021 at the earliest.

The Council of States mainly resolved the following:

• The compulsory share for parents will be eliminated.
• The compulsory share for descendants will be reduced from ¾ of the legal estate to ½.
  
• If the testator allows the surviving spouse to use assets due to be inherited by their joint offspring (right of usufruct), the freely disposable portion of the estate – in addition to the right of usufruct – is now ½ instead of the previous ¼.
• The surviving de facto life partner does not have any statutory claim to support.
• The Council of States rejected the minority motion to reduce the compulsory share by up to another 50% in certain cases. This related to cases concerning (a) benefits to individuals that had lived together with the testator in a domestic partnership for a period of at least five years at the time of the testator’s death or (b) the reduction of the compulsory share to simplify the transfer of a business. As a result, the complex issue of business succession planning will be addressed uniformly in a separate part of the inheritance law revision process, the consultation process for which ended on 30 August 2019.
• Spouses undergoing a divorce each lose their claim to the compulsory share as soon as joint divorce proceedings have been initiated. If one spouse files for divorce, the spouses each lose their claim to the compulsory share as soon as the divorce proceedings have commenced in cases where both spouses have consented to the divorce or have lived separately for at least two years. The same applies to registered partnerships.

The Council of States’ decision to adopt the bill accomplishes the motion’s original intent of modernizing Swiss inheritance law by giving testators greater discretion and simultaneously refraining from interfering with the testator’s free will.

Common law spouses still have neither a legal claim to the inheritance, let alone a compulsory share, nor a legal pension entitlement under inheritance law. That means the testator must actively make estate planning arrangements to benefit his/her common law spouse. The testator may unilaterally – in other words without the consent of his/her relatives – choose to bequeath at least half of the estate to his/her common law spouse or a third party in his/her last will and testament. He/she must actively make use of this freedom, either by drawing up a last will and testament or an inheritance agreement, to benefit specific individuals.

The reduction in compulsory shares resolved by the Council of States correspondingly means an increase in the testator’s freely disposable portion of his/her estate. They will be free to choose what happens to at least half of their estate as a result.

This should focus on formulations pertaining to:

• compulsory shares
• the freely disposable portion
• inheritance/compulsory share entitlements in the event of a divorce or if divorce proceedings are pending
• the freely disposable portion if a surviving spouse is granted a right of usufruct

If a testator prepared a last will and testament 10 years ago and wrote...

a) "I hereby bequeath the freely disposable portion of ¼ to my son, X."
b) or "I hereby bequeath the freely disposable portion to my son, X."
c) or something along the lines of "I hereby bequeath the freely disposable portion, in accordance with the laws in effect at the time of my death, to my son, X."

...this might need to be specified in more precise terms. Doing so will clear up any questions about how to interpret the testator’s instructions and prevent undesired results.

The next step will be for the National Council to reach a decision on the first part of the inheritance bill, which is expected to take place in 2020. Precisely when reduced compulsory shares might enter into force, however, is still uncertain and is not expected before 2021 at the earliest.

The second part of inheritance law revisions concerns business succession planning and aims to simplify transfers within the family. It should be possible to leave a business to a single heir, for example. Given Swiss SMEs’ importance to the country’s economy and society as a whole, there should be measures in place that prevent these companies from being split up or forcibly sold. The consultation process ended on 30 August 2019 and its results now need to be assessed.

Part three of the revisions to inheritance law relates to technical issues.

Revisions to inheritance law provisions in the Swiss law on private international law (IPRG/LDIP) must also be kept in mind. These revisions mainly aim to reduce conflict-of-law situations and disputes between applicable laws in cross-border inheritances and will simplify estate planning. The consultation process for this ended in May 2018. A draft bill and dispatch issued by the Federal Council are expected by the end of 2019.