The modernisation of Swiss inheritance law represents a significant part of the numerous legal reforms that will come into effect on 1 January 2023.
These legal reforms have been introduced because certain key principles of Swiss inheritance law are no longer relevant to modern day society, where average life expectancy is increasing and forms of family life are becoming more diverse.
These reforms to Swiss inheritance law are therefore aimed at giving testators greater flexibility and freedom over the disposal of their property upon death, by increasing the freely disposable portion and by introducing special provisions in relation to divorce proceedings.
Increase in the freely disposable portion
The freely disposable portion will firstly be increased because the reserved shares to which the testator’s parents are entitled are being abolished. The rationale behind this reform is that demographic trends are such that nowadays there are very few people who wish to pass on their estate to their parents in the event of their death.
The freely disposable portion will also be increased because the reserved share for descendants will be greatly reduced from ¾ of the legal share of the estate to ½.
In other words, as from 1 January 2023, only the surviving spouse (or partner) and descendants will be entitled to a reserved share and this will be ½ of their legal share. This means that the disposable portion will also be ½ in all circumstances.
The reduction in reserved shares and the increase in the freely disposable portion are particularly welcome when it comes to transfers by inheritance of a family business and therefore represent the first step in a series of inheritance law reforms applicable to businesses. The reduction in reserved shares therefore theoretically reduces the risk that a family business will end up in the hands of heirs who do not get on with each other and who participate in the company simply because they hold a reserved share. This first step should come with future additional measures such as:
- Right for an heir, on request, to be allotted the whole of a business in the distribution of the estate if the deceased had not made any provision in that respect;
- Possibility for the heir taking over the business to obtain payment extensions with respect to hotchpot and abatement in relation to the other heirs;
- Specific rules on the valuation of businesses, whereby the determining value is no longer the value at the time of opening of the succession (death) but the value at the time of the allotment (if demonstrable); and
- Reinforced protection for forced heirs, by preventing the reserved share from being distributed in the form of a minority share over which another heir would have control.
All of these measures are currently still being developed and, despite the recent Message by the Federal Council, they seem destined to undergo numerous amendments by Parliament.
Special provisions in relation to divorce proceedings
Presently, the surviving spouse retains their right to the share of the estate and to the reserved portion, even if the other spouse or partner dies during the course of the divorce proceedings.
The legislative reform coming into force on 1 January 2023 provides that the spouse will lose their right to a reserved share as soon as divorce proceedings have been commenced, provided that they result in a final divorce order.
These new rules also cover allotments made by marriage contract or disposition mortis causa, provided that the respective deeds do not explicitly stipulate that they will continue to apply even in the event of divorce.
Author: SwisNot, Bern
Revision of private international law on succession
Alongside the reform of substantive provisions of inheritance law, the succession-related provisions of the Federal Act on Private International Law (LDIP) are also being reformed. The bill aims to modernise the existing provisions and to avoid the risk of conflicts of jurisdiction with foreign authorities, particularly within the European Union, as well as ensuring that international inheritance law is more relevant to the legal system prevailing in Europe, which has been standardised notably by the European Regulation on international successions.