In most cantons, only direct descendants are exempt from inheritance tax. Inheritance taxes, which can be substantial, are generally incurred when transferring assets to unrelated persons, such as in the case of cohabiting couples or real estate abroad.

Inheritances

Estate planning: inheritance made easy

Q: Predeceased beneficiary

If you allocated your estate to specific individuals in your will a long time ago, the beneficiaries could pass away before you do. The corresponding share of the inheritance would then revert to legal heirs, whom you might not have wanted to leave anything at all. You should consider this when drafting your will and designate contingent beneficiaries in the event of this happening.

Early estate planning has many benefits, especially knowing you’ve done all you can to spare your relatives any future trouble. Read how to go about personalized, legally watertight estate planning and learn how much flexibility you have.

by UBS Insights 16 Sep 2024 3 min read

Content:

Without estate planning, your estate will go to the legal heirs.
The volume of inheritances, advance inheritances and gifts has increased significantly.
Preventing potential conflicts is an important motivation for early estate planning.
Executors can take on the task of executing your will.
To the conclusion

Your life circumstances change continuously – remember to regularly review your estate planning and keep it up to date.

90 percent of Swiss people want to avoid inheritance disputes among their heirs. Yet according to a 2023 survey conducted by the Zurich University of Applied Sciences, this intention does not always translate into action, with only about half of testators making concrete plans for their estate. We show you how it’s done.

What does estate planning involve?

First, clarify who your legal heirs are. Swiss inheritance law favors spouses and close relatives over more distant ones. All heirs together form a community of heirs. If you do not limit its scope, it can include a great many people both in Switzerland and abroad. Settling your estate could then become difficult.

If you do not want the default statutory position to apply to your inheritance, you can make individual arrangements. Following the revision of inheritance law in 2023, you now have more flexibility to divide your estate according to your wishes beyond the compulsory portions. To divide up assets according to your wishes you can, for example, designate specific individuals as heirs in your will, as well as make bequests to other individuals or organizations.

Facts and figures

0 %
of heirs want to avoid inheritance disputes.
0 %
of Swiss people put off estate planning.
0 CHF
billion were estimated to have been inherited or gifted in Switzerland in 2022.

Source: ZHAW School of Management and Law (2023)

The advantages of early estate planning

Conflict avoidance: Following the period of mourning within the family, the subsequent division of the inheritance often brings up emotional baggage from the past. That’s why it makes sense to settle these matters during your lifetime, especially if your family situation is complex. The big advantage of early estate planning is that you can prevent or at least mitigate future conflicts. This can be achieved by involving the family early and communicating transparently with all members about what you intend to do with your estate. To prevent surprises, clarity is key. Uncertainty can be eliminated and you can rest assured that you have arranged your affairs according to your wishes.

Gifts: Another advantage of early estate planning is the ability to make gifts to persons special to you during your lifetime. To do so, you can use a portion of your assets that you are sure you will not need yourself in old age. What you have left over can give beneficiaries an advantage, for example, when purchasing a home. An advance inheritance allows heirs to live in a home of their own at a young age, such as when starting a family. If implemented early, the parties involved can also optimize inheritance and gift taxes.
Cohabitation: Without their own estate plan, cohabiting partners are left empty-handed as surviving dependents, unlike spouses and legal heirs. Cohabiting couples who want to be sure their partner receives an inheritance should draw up a will and ensure that their partner is included when the inheritance is divided up.

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Tips for estate planning

The process of dividing the estate can be very emotional for the surviving dependents. These tips can help you avoid potential conflicts within and outside the family.

Communicate openly

Talk transparently about advance inheritances. Someone who grants an advance inheritance to only one of their children should clarify with the others whether and to what extent this amount will later be deducted from the inheritance of the child in question.

If you want to treat all children in patchwork families equally, you need to take the necessary steps. Without a clear declaration of intent, challenging situations can arise because, for example, only the biological children receive an inheritance. If you want your partner’s children to benefit from your will, you must explicitly name them as heirs or legatees. Please note that significant inheritance taxes may apply depending on the canton.

Provide for the costs of care in old age

You should carefully consider gifts and advance inheritances to ensure you still have enough money for yourself in your old age, including for any nursing care you may require. As a precaution, calculate how much money you are likely to need for your own needs in future should you live for a long time and bearing in mind that the cost of living will rise in the future. Repayable loans to the beneficiaries is one way to reduce financial risk in old age.

Inheritance without heirs

The inheritance rights of relatives end with the grandparents, and the inheritance then goes to the canton and the municipality of residence. Single persons without legal heirs can decide for themselves to whom they want to leave their assets. If they fail to stipulate who should inherit what, after death all property will pass to the canton and, depending on the canton, to the municipality of residence.

For single persons, it is very easy to use assets philanthropically as a gift or bequest from their estate. This generally applies to anyone who does not need to consider compulsory heirs (spouses and descendants). In the case of large fortunes, it may even make sense to set up a foundation.

You should make sure that your will is clearly worded. It must evidently state which person or institution is to be a beneficiary and with what amount or share of the inheritance. In a worst-case scenario, wills requiring interpretation could be declared invalid by the court.

Don’t forget taxes

Predeceased beneficiary

What happens to retirement savings

Pension fund: The credit balance will be converted into a survivor’s pension in the event of death. If there are no eligible relatives, the funds do not have to be paid out to other heirs. Often, regulations in this case provide for a voluntary capital payout to certain beneficiaries.
Vested benefits account: The balance will be paid out to the legal beneficiaries upon death, primarily the spouse and children. To a limited extent, you can change the order and entitlements of these and other beneficiaries. If you would like to designate your partner in a cohabitation arrangement as the beneficiary, you need to submit a beneficiary declaration.
Pillar 3a: In the event of death, savings are split between the partner (in marriage or a registered partnership) and other heirs in line with the beneficiary declaration. Your children and partner can receive special benefits under certain circumstances. Inform your pension fund who is entitled to what.

Terms to know for estate planning

Anyone dealing with estate planning will inevitably come across some unfamiliar terms. Since these differences matter, here’s a brief introduction.

Inheritance and legacy/bequest

A legacy or bequest is a testamentary gift of an asset. This gift is not the same as an inheritance.

The rights and obligations that come with a legacy are different from those of an inheritance. Unlike an heir, a person who receives a legacy is generally not liable for the debts of the deceased person. Someone who is offered a legacy must decide and communicate whether they accept the bequeathed amount or item or not. To avoid any misunderstandings, the distinction between inheritance and legacy should be clearly stated and explicitly mentioned in your will.

The difference is particularly important for people who, for example, want to leave something to a charitable organization. A legacy allows you to remember people or organizations that are not legal heirs.

Will and inheritance contract

An inheritance contract requires that at least two parties agree on the content. A will, however, is a declaration of intent by a single person. With an inheritance contract, you can make more extensive arrangements than with a will. For example, you enjoy a lot more freedom to allocate your assets when heirs waive their compulsory portions in favor of other persons in the inheritance contract.

Unlike a will, an inheritance contract is only valid after notarization and can only be changed by a notary. If you replace a will with a new version, you should destroy the old will (unless it is only a codicil to the existing will).

Patient decree and advance care directive

By planning your estate early, you are also anticipating the possibility of not being able to make arrangements yourself in future due to ill health. Forward planning also includes considering to whom you want to transfer the responsibility for decisions in the event of incapacity. It is best to appoint a person while you are still fully able to act.

There are two instruments for this: The advance care directive covers the areas of personal care, asset management and your representation in legal matters. The patient decree stipulates medical matters. It states which medical measures should be taken and which should not be taken if you are no longer able to make decisions yourself.

Marriage contract and asset agreement

In marriage and registered partnerships, the marital property regime also affects how the estate is divided up. Matrimonial property law takes precedence over inheritance law. Should a marital property dispute arise, the first thing that must be determined is which part of the marital assets belongs to the surviving partner and which part constitutes the estate.

As a rule, the community of acquired property applies to the marital property regime in marriages; in registered partnerships, the separation of property applies. If you want to change this for your relationship, you require a marriage contract if you are married and a property contract if you are in a registered partnership.

Who should manage your estate?

To relieve the burden on the family and avoid conflicts, you can decide that after your death, an executor takes care of your estate arrangements. This is a freely appointed person you trust. They handle all of the administration in accordance with your will, prepare the division of the estate in advance and find compromises in case of disputes. If you do not appoint anyone for the execution of the will, the heirs must agree on the division of the estate without external support.

It is advisable to appoint an expert as executor, especially in the case of considerable wealth, patchwork families and when it comes to the division of companies and properties.

Conclusion

Estate planning is a topic that you should look into sooner rather than later. Arrangements can be modified if necessary, for example, due to family or career changes. Estate planning is therefore not a one-time process, but a continuous one.

You can make use of the services of a professional to ensure that everything is covered and set up correctly. You can contact experts, for example, in notary offices, law firms, or at the bank.

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Content:

The advantages of early estate planning

How is your retirement provision?

Inheritance and legacy/bequest

Will and inheritance contract

Patient decree and advance care directive

Marriage contract and asset agreement

Disclaimer

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