Markus will always remember that moment. He and his younger brother Martin were at the notary when their father Egon Hauser* signed the contracts to sell their property. The sale proceeds amounted to several million Swiss francs. The real estate was one of two investment properties that made up the majority of the family’s assets. Markus and Martin noticed that managing it was increasingly becoming a burden to their 72-year-old single father. It had also often been a topic of conversation at the dinner table.

The ravages of time ended up being helpful. They discovered in one of their regular family discussions that the property should have undergone an expensive renovation. All of them agreed that they didn’t want to shoulder those financial and administrative costs. Egon also indicated that he would happily support his sons with the proceeds from the sale of the property. The brothers were relieved, as they had their own plans for the future. Markus (45) wanted to become self-employed and would be very grateful for the starting capital. Martin (40) had long entertained the idea of a home for him and his family.

Emotions also at play

Egon Hauser entrusted UBS to handle the sale, as he already had a private account at the bank. UBS presented him with a convincing concept analysis for his entire succession planning, which included the property sale. His UBS client adviser was able to consult with specialists from financial planning and the Real Estate Advisory, which includes architects, engineers and business economists. The Hausers were able to take advantage of their combined extensive knowledge on real estate, finance and strategy, which was a huge advantage when tackling complex tasks like determining the property’s value and closing a sale of this volume. “Over time, a property’s value, for example, progresses upwards or downwards. It’s also determined individually and emotionally,” the UBS client adviser points out. That can often lead to conflict within the family.

Structuring proceeds from the sale

The way in which the UBS client adviser moderated between the three men and the specialists allowed for questions to be answered quickly and doubts on closing the sale to be cleared up. They were also able to get a good price on the sale. “There are many facets to passing a property’s value on to the next generations. Having the expertise from Real Estate Advisory and financial planning on hand is the best way to ensure assets are fairly divided across generations,” the UBS client adviser explains further. After the sale, it was time to structure the resulting liquidity. Egon Hauser knew about his sons’ dreams, but also wanted to better his own retirement. He decided to endow his sons with 1 million Swiss francs from the sale’s proceeds each, and use the remaining capital for his own retirement. But how was Egon supposed to manage his assets sensibly?

His UBS client adviser developed a proposal with him on how to distribute his assets, which were divided into three parts. The first part of his assets, consisting primarily of liquidity, would cover Egon Hauser’s current and planned expenses. The capital in the second part should secure his long-term livelihood. The third part contains additional capital that isn’t needed for his long-term livelihood and that his sons can inherit. Egon Hauser agreed to this proposal. It gave him transparency over his assets; he could support his sons, while also ensuring he could continue to enjoy his standard of living with a clear conscience. He was also protected in case of illness.

For his part, Markus was pleased with his newly achieved independence, which he could now act on with help of the gift. He was also relieved that his father didn’t have such a huge burden anymore. Additionally, they’d already discussed passing on the second investment property, which originally belonged to his paternal grandparents. His younger brother had an especially strong emotional connection to the property. But Markus was confident that his father, Martin, the UBS client adviser and her team would find the best possible solution on how to proceed.

Real estate checklist

How to create a stable foundation for real estate succession:

  • Property is often the biggest material component of an estate. Passing on property thus has notable influence on succession planning and the parties involved.
  • Ensure that the heirs’ wishes and expectations for the real estate are known and that the existing mortgage is affordable.
  • In case of an advance against inheritance with a property, its valuation and any financial settlement should be recorded in writing by the heirs with all concerned family members involved.
  • Each time a property is inherited without a specific succession plan, the community of heirs becomes larger. This makes coordinating its management or a future sale more difficult.
  • When selling an investment property, participants should consider the impact that losing regular rental income has on the portfolio.

UBS Family Banking

UBS Family Banking believes two central features are key to the sensitive topic of "Inheritance and Bequeathing".

Fair distribution of family assets

  • Developing a common understanding of personal wishes and needs while thinking of the next generation.
  • Setting up a financial plan and getting an overview of assets.
  • Developing and regularly reviewing the succession solution.

Preserve family value across generations

  • Developing your own approach to investing.
  • Discussing and selecting a suitable investment strategy.
  • Including the next generation in the investment process.

This article was written by NZZ Content Solutions on behalf of UBS.