The inheritance contract offers an alternative here. It is a binding contract between the future testator and the heirs concerned. Unlike a will, it cannot be revoked or amended unilaterally, but only with the consent of all contracting parties. This highly binding nature makes it an effective instrument for securing estate planning in the long term, creating planning security for the next generation and avoiding later conflicts.
Inheritance contracts play a key role, particularly in patchwork families, with cohabiting partners or in connection with family businesses. It makes it possible to make binding arrangements that go beyond the legal requirements, to agree waivers of compulsory portions and to secure individual wishes in a binding manner. The inheritance contract is therefore not just a legal document, but a contract between the generations that provides clarity and stability.
Legal basis and binding force
The inheritance contract is regulated in the Swiss Civil Code (ZGB) in Articles 494 ff. It constitutes a disposition of property upon death, but unlike a will, it is not unilateral. Rather, it is a bilateral legal transaction that is concluded between the testator and at least one other contracting party.
The inheritance contract must be publicly notarised. This means that it must be concluded in the presence of a notary (usually a notary public) and two witnesses. This formal requirement serves to protect the parties involved, ensures seriousness and reduces the risk of subsequent challenges.
Inheritance contracts can be used to make binding arrangements for legacies, bequests or waivers of compulsory portions. In principle, conditions or stipulations are also possible. The options are more extensive than with a will, although the compulsory portions of the heirs must always be preserved. Unless they expressly waive them in the contract.
The great strength of the inheritance contract lies in its reliability. For the testator, it means that the arrangements made cannot be subsequently called into question or unilaterally amended by individual heirs. For the heirs, in turn, it creates planning security, as they receive clarity about their position in the estate at an early stage. This mutual obligation is a decisive advantage, particularly in complex family or economic constellations.
Options for structuring the inheritance contract
The inheritance contract is the most flexible instrument in Swiss estate planning. It combines the binding nature of a contractual commitment with the breadth of a disposition of property upon death. Unlike a will, an inheritance contract allows several parties to agree jointly, bindingly and with foresight who will receive which rights and obligations in the event of inheritance. Particularly in constellations with competing interests (spouses, children from different relationships, unmarried partners, co-heirs in a company), clear, permanent solutions can be created that can no longer be unilaterally amended.
Waiver of compulsory portion and waiver of inheritance
A key structuring option is the contractual waiver of a compulsory portion. Heirs entitled to a compulsory portion, in particular descendants, can waive their compulsory portion rights in full or in part. The waiver can be unconditional or in return for compensation, settlement or other benefits. This creates additional room for manoeuvre, for example to strengthen the surviving spouse, to protect a cohabiting partner or for the orderly transfer of a company.
The waiver of a compulsory portion is to be distinguished from the waiver of inheritance. Here, a legal heir waives his or her inheritance rights in whole or in part, often in return for compensation during his or her lifetime (purchase of inheritance). Both instruments require the form of an inheritance contract and bind the parties permanently. In practice, they are often combined with other components, such as bequests, usufruct or staggered payments.
Inheritance, quotas and legacies
In an inheritance contract, binding heirs can be appointed and inheritance quotas determined. In contrast to a will, this appointment of heirs cannot be cancelled unilaterally at a later date. Where the full appointment of heirs is not appropriate, a bequest is an option: Certain persons receive a specifically designated asset or a sum of money, without the status of heir. Advance legacies in favour of persons who are also heirs are also possible, for example a certain amount or a specific object "in advance" before the rest of the estate is divided.
In patchwork constellations, quotas and legacies are often used to favour the surviving spouse or partner without leaving the children from the first marriage empty-handed. It is conceivable, for example, to allocate a high inheritance quota to the spouse and to allocate certain, clearly quantified bequests to the children, which are paid out over a staggered period of time.
Requirements, conditions and time limits
The inheritance contract allows for conditions, time limits and requirements. Payments can be tied to specific requirements, such as a minimum age for the beneficiary, stages of education or the continuation of a family business. Cancellation conditions are also possible, according to which a benefit ceases to apply if a certain event occurs. Conditions are highly customisable: they oblige heirs or legatees to do or refrain from doing a certain thing, such as maintaining a family grave, preserving a work of art in the family or protecting an agricultural property.
It remains important that unauthorised or immoral conditions and requirements have no effect. Permissible, clearly formulated modalities, on the other hand, significantly increase planning security.
Division rules, allocation arrangements and equalisation
One of the biggest drivers of conflict in the event of inheritance is the practical division. The inheritance contract can specify clear division rules here: Who receives which property, at what value and according to which method are differences equalised. Allocation arrangements for individual assets are possible, such as the preferential allocation of a property to a specific person or the allocation of a securities portfolio to another.
The question of equalisation (offsetting of lifetime gifts against the inheritance share) can also be regulated in the inheritance contract in deviation from the basic legal order. For example, it can be contractually stipulated that a previous loan, start-up financing or an advance inheritance payment is not or only partially to be offset. It can also be agreed that a gift to a child is to be offset in full against the child's inheritance share in order to avoid later disputes.
Security in rem: usufruct and right of residence
Often the surviving spouse or a cohabiting partner should be able to remain in their own home, while ownership remains with the children in the long term. The inheritance contract can provide for rights in rem for this purpose, in particular usufruct or right of residence.
The usufruct grants the beneficiary the right to use the property and reap the benefits, but remains tied to the ownership of the heirs. It is suitable for securing the right of residence and income (e.g. rental income), but may require careful structuring in terms of maintenance obligations and tax consequences. The right of abode is narrower, is limited to occupancy and is often the more streamlined solution if no income is to be generated from the property.
Both rights can be limited in time or linked to conditions, for example until remarriage or until a certain age is reached.
Appointment of prior and subsequent heirs; substitute heirs
The path of an asset across two inheritance cases can be mapped out with the appointment of prior and subsequent heirs. The previous heir receives the assets first, but must preserve them for the subsequent heir. This structure is suitable for keeping family assets, particularly property or companies, in one line over generations. It is helpful in patchwork families if the surviving spouse is to be protected initially, but the assets must later pass to the children from the first marriage.
It is also worthwhile to appoint a substitute heir. It specifies who takes the place of an intended heir if he or she should predecease, renounce or become unworthy of inheritance. Clear substitute heir regulations prevent gaps and unwanted legal substitution orders.
Payment, deferral and valuation mechanisms
Inheritance contracts should take liquidity into account. In addition to the valuation methodology, payment plans are key: instalment payments, due dates, value protection clauses, interest rates, securities and conditions subsequent. This helps to avoid forced sales of property or company shares. A clear payment plan makes it possible to keep assets in the family and still fulfil the justified claims of co-heirs.
In the case of real estate, allocations to a favoured heir with a simultaneous obligation to pay compensation to the others have proven their worth. Contractual privileges for one heir are conceivable, combined with a fixed equalisation value or a valuation procedure. If the equalisation is deferred, this prevents a short-term loan or sale.
Patchwork families: a fine balance between security and fairness
Legitimate interests clash in patchwork constellations. The inheritance contract allows for finely tuned solutions. Frequent components are waivers of compulsory portions by adult children in favour of the new spouse, staggered bequests to children from the first and second relationship, appointment of subsequent heirs in favour of the children of the first marriage as well as usufruct or residential rights to the home in favour of the surviving spouse.
Two-stage protection has proved its worth: in the short term, the spouse is protected by usufruct or right of residence; in the long term, ownership is channelled to children. At the same time, stepchildren can be bequeathed as they are not legally entitled to inherit. Precise equalisation rules ensure that earlier gifts to individual children are appropriately offset in the subsequent division of the estate.
Practical example
Mr K. is married for the second time and has two adult children from his first marriage. He has lived with his second wife for 15 years in a house that he brought into the marriage alone. They both want to ensure that his wife can remain in the house after his death, but that the children from his first marriage are not disadvantaged.
Without an inheritance contract: According to the statutory succession, the children from the first marriage inherit two thirds of the estate, the wife one third. The house would either have to be sold or encumbered with a high mortgage in order to pay off the children. Conflicts and financial bottlenecks are almost inevitable.
With an inheritance contract: The children contractually waive their compulsory portion and instead receive a legacy in the form of a fixed sum of money. The wife becomes the sole owner of the house and is also secured with a right of residence. She can remain in her familiar surroundings, while the children are also guaranteed.
Real estate: allocation, management, rights and obligations
Real estate is emotionally and financially significant. The inheritance contract should therefore provide for clear allocations: Who receives the property, who receives a right of residence or usufruct, who is responsible for what maintenance, what investments are to be settled, how mortgages are to be continued or redeemed.
It makes sense to have rules on maintenance and burden sharing during a usufruct: who pays the mortgage interest, who pays the building insurance, who pays for ongoing maintenance and who pays for major renovations. In the case of residential rights, operating costs and ancillary costs can be clearly allocated. If you wish to block sales, pre-emption or purchase rights, these can be stipulated in a will and secured by conditions, but must be formulated in a way that is compatible with property law. In the event of a premature move-out or sale, a reversion clause or an offsetting mechanism is recommended in order to maintain a fair balance.
Practical example:
Mr and Mrs M. own a detached house worth CHF 1.5 million. They have two daughters. After the death of both parents, the house is to pass to one daughter, who lives there with her family. The second daughter lives abroad and is to be financially compensated.
Without an inheritance contract: the two daughters would inherit the house jointly. One would have to pay out the other. If no agreement is reached, there is a risk of a partition auction, which often leads to financial losses and can tear the house out of the family.
With an inheritance contract: The parents contractually stipulate that daughter A. receives the house. In return, daughter B. receives a legacy of CHF 750,000, payable in instalments over ten years. In addition, a value protection clause is agreed to maintain the purchasing power. This keeps the house in the family and ensures fairness between the daughters.
Taxes
Inheritance and gift taxes are regulated at cantonal level and vary greatly. Spouses are exempt from inheritance tax in all cantons, direct descendants in most; cohabiting partners, on the other hand, are often not. The inheritance contract does not change this, but it can influence the distribution of the tax burden in that gifts to tax-favoured persons are higher and those with a higher tax burden tend to be made in the form of staggered payments, bequests or rights in rem.
In the case of usufruct structures, the question arises as to who pays tax on income and how the burden is distributed. In the case of real estate, property gains tax must also be kept in mind, for example if a subsequent sale is planned or if transfers take place in the course of the division of an estate. In corporate cases, the definition of the valuation procedure can also have tax effects, particularly if hidden reserves, goodwill or blocking periods are affected. Coordinated planning with tax advice is advisable here.
Execution of wills and settlement of estates
An executor can also be appointed in the inheritance contract. He or she ensures that the instructions are carried out, represents the estate vis-à-vis third parties and carries out the division in accordance with the contract. In complex communities of heirs, particularly those with real estate or companies, the executor provides professional management of the estate and relieves the heirs emotionally and organisationally.
Combination with the marriage contract
Inheritance and marriage contracts are most effective when used in combination. Under matrimonial property law, for example, the participation in acquired property can be modified, the separation of property can be agreed or a favourable proposal allocation can be provided for. Under inheritance law, this initial situation is supplemented by legacies, bequests, waivers of compulsory portions and division rules. All in all, the result is a holistic arrangement that extends from cohabitation to the settlement of the estate.
In most-favoured-nation concepts, the spouse receives maximum protection under matrimonial property law and inheritance law, while descendants are taken into account via bequests, the appointment of subsequent heirs or staggered payments. In patchwork families, the surviving spouse can thus be protected without penalising the children from the first marriage.
The inheritance contract is a key instrument in estate planning. It creates planning security, enables individualised solutions and can prevent disputes. It offers clear advantages over a will, particularly in complex family constellations, in the case of real estate or companies.
Early advice and careful structuring are crucial in order to realise your own wishes in a binding manner and provide the family with long-term security.