Passing on property

Plan early on when and how you would like to divide up and pass on your property

The mere fact that a property can’t simply be divided makes passing it on a challenge. Married couple Reto and Anna S. faced such a situation. Both wanted to distribute their properties fairly among their three children but not go without anything during their lifetime.

Reto and Anna S. have three adult children. The couple owns a private vacation home and a multifamily dwelling, which is an investment property. It’s important to them to keep their properties in their family.

Passing on property
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At first, my husband and I wanted to leave everything up to inheritance law. Then we realized we had our own ideas about how we wanted to pass on our properties. Transferring them while we are still alive was the best solution for us.

Anna S.

The couple quickly discovered that inheritance law didn’t suit their situation very well. When one spouse dies and the marital property is dissolved, a property – for example, the parental house – may be considered fully part of their estate. The children get one half of this and the surviving parent the other.

Now, if a legal heir wants to be compensated for their share of the inheritance, the following questions arise:

  • Are there enough liquid assets to buy out an heir or settle the inheritance taxes?
  • And if all heirs grant the surviving parent a right of usufruct, what is this worth and how must it be taxed? 
  • Would it perhaps be a good idea to maintain the community of heirs without dividing the estate?

One solution would be to pass on your property during your lifetime. This would mean that your children become owners of the properties at an early stage. At first, the following solution seemed obvious to the couple: One child would receive the private vacation home and the other two children would split the investment property. The parents would retain usufruct for the rest of their life.

But beware: A couple of pitfalls still lurk in this option. For example, the children might want to renovate but the parents not. Or the investment property might increase in value, but the vacation home might not. Concluding an inheritance contract with all parties concerned can settle a lot in this regard.

Did you know that …

  • ... even a right of usufruct can be subject to inheritance tax?
  • ... an inheritance advance from parents to their children is often tax-free, but in the event of the death of a child, parents who are legal heirs could face inheritance taxes?
  • ... in the case of real estate, the gift and inheritance tax is dictated by the tax law of the canton in which the property is located? 

How to prepare

Passing on properties is exceptionally complex. Get advice and make sure you’ve taken everything into consideration. We’ve prepared two informative documents to assist you. Order them now – we’ll gladly send them to you via email for free.

Passing on property
Our free guide