Revised inheritance law allows for greater flexibility

Swiss inheritance law will undergo a major revision which will take effect on 1 January 2023. The respective changes to the Civil Code will allow testators greater flexibility when drafting their will. In particular, the forced heirship rules will be modified to the detriment of the testator's parents and children and therefore merit careful consideration. This article summarises the most important changes.

Major changes

Reduction of statutory entitlement of descendants and parents to compulsory portion of estate (forced heirship)

Under Swiss law, testators are not always permitted to freely dispose of the entirety of their estate. Instead, the current applicable law grants a claim to the testator's spouse, descendants and (in the absence of descendants) parents to a compulsory portion known as 'forced heirship' or 'statutory entitlement'. This compulsory portion is defined as a fraction of the respective heir's 'statutory portion' (ie, the portion of the estate allotted to said heir if the testator does not make any testamentary dispositions). If a testator makes a testamentary disposition violating the statutory entitlement – for example, by drafting a will to the exclusion of their children – the respective heirs can challenge said testamentary disposition after the testator's demise by filing an action to claim their statutory entitlement from the heirs whom were bequeathed more than permitted.

The revised law will reduce the compulsory portion of the testator's descendants and abolish the testator's parents' forced heirship rights entirely. Thus, a testator who is not married (or in a registered partnership) and without issue will no longer be subject to any compulsory forced heirship rules. In this case, the testator will therefore be able to dispose of their entire assets without limitations.

The ratio between the freely disposable portion and the compulsory portion differs depending on the individual constellation of heirs with forced heirship rights.(1)

By reducing the compulsory portion, the revised law allows for greater leeway in estate planning. In particular, the legislature considered the following two instances in which testators with descendants may benefit from increased flexibility:

• First, testators may bequeath a more sizeable portion of their estate to their unmarried life partner.
• Second, the revision offers company owners the ability to prevent the division of company assets following the testator's demise in order to comply with forced heirship rights of the testator's spouses and children.

More flexibility to benefit spouses to detriment of common children

The current law provides for an exception to the descendants' forced heirship rights in favour of the testator's spouse. Testators may now bequeath to their spouses the usufruct right of the entire compulsory (and statutory) portion of their common descendants. Under the current law, the disposable portion (which the testator may assign to the spouse in addition to the usufruct) amounts to one-quarter of the estate.

Under the revised law, this exception will still apply. However, the disposable portion remaining next to the usufruct will amount to one-half of the estate, which will allow the testator to further benefit their spouse.

Restriction of spouses' succession rights in case of pending divorce proceedings

Under the current law, the spouse's entitlement to the compulsory portion only ceases once the divorce is finalised (ie, once the respective court decision has entered into full force).

Under the revised law, the spouse's entitlement lapses upon filing for divorce, provided that:

• the divorce proceedings are either initiated or continued on joint request; or
• the spouses have been separated for more than two years.

Thus, the surviving spouse has no entitlement to claim a compulsory portion should the other spouse die during the divorce proceedings. In such cases, the surviving spouse may no longer raise claims relating to prior testamentary dispositions made by the deceased spouse.

However, it should be noted that the spouses remain statutory heirs until the divorce enters into full force. Therefore, testators wishing to exclude their soon-to-be-divorced spouses as heirs during the divorce proceedings must make a corresponding testamentary disposition.

Outlook

The revised provisions will allow greater flexibility in estate planning, most notably due to the newly introduced reduction of the statutory heirs' compulsory portions (forced heirship). Further, the revised law will enable testators to maximise the benefit bestowed to their spouses or, in contrast, exclude any benefits due to their soon-to-be-divorced spouses.

It should be noted that revisions of related acts (eg, the Public International Law Act) are also ongoing or have recently entered into force. The outcome of those revisions may lead to even greater flexibility in cross-border estate planning. For example, Swiss-foreign dual citizens may opt out of the applicability of Swiss inheritance law, including rules of forced heirship, by choosing the inheritance law of their other state of origin to apply instead. Under the current law, only non-Swiss citizens are allowed to do so. Also, as of 2021, testators are permitted to include arbitration clauses in their last wills and trust deeds.

The proposed changes and the respective greater flexibility can and should be considered in estate planning with links to Switzerland. However, the diligent drafting of testamentary dispositions remains important until the revision enters into force to ensure that the dispositions are valid and enforceable under both the currently applicable and the revised law.

Endnotes

(1) The below table compares the different groups of heirs and their varying entitlements under the applicable and the revised law. However, this table does not account for the spouse's claims under the matrimonial regime, which can amount to up to 50% of the entire estate and must, if applicable, be deducted from the estate before the below ratios are applied.

(2) The portion of the entire estate excluding the matrimonial regime.