Real estate in the estate: A guide for real estate owners

If the testator has not left a last will and testament (will / contract of inheritance), Swiss inheritance law regulates the legal succession. What options are there to clarify everything during one's lifetime in order to avoid disputes and how can spouses optimally benefit each other?

Legal succession can lead to disputes among the heirs, especially if real estate is the largest item in the estate. In particularly bad cases, the division of the inheritance must be carried out by a judge. In this case, the family community is usually disturbed in the long term.

As a future testator, you can make a significant contribution to preventing disputes by discussing the topic of inheritance with all parties involved during your lifetime.

The following sections explain individual questions that are of great practical relevance: How can I transfer a property to my wife/husband during my lifetime? What do I have to bear in mind with regard to inheritance and gift tax? What happens to the property between death and division and how is it divided if there is no will?

Spousal benefit

The so-called spousal beneficiary during one's lifetime is a widespread variant to protect the other spouse in the best possible way in the event of one's own death. In our example, Vito transfers ownership of the joint house to his wife Maria during her lifetime, free of charge. Now the aspects of matrimonial law, property law and inheritance law are taken into account.

With the transfer, Vito assures his wife a roof over her head for the rest of her life. However, as long as the house is considered the family home, Maria cannot sell the house without Vito's consent. → Aspect of matrimonial law

In the event of death, the division of property is carried out before the distribution of the estate. If no marriage contract has been concluded, Vito and Maria are subject to the matrimonial property regime of the division of the acquired property. Under this matrimonial property regime, there are four property classes: each spouse's own property and the inheritance of each spouse. Swiss civil law stipulates that assets which one spouse has brought into the marriage, inherited or received as a gift free of charge are to be allocated to the other spouse. Own property is assigned. In the present case, the house therefore belongs to Paula's own property. → Aspect of property law

This gift during their lifetime has an impact on Simon and Tamara's inheritance. Swiss inheritance law now regulates whether and how the gifts received must be counted towards the inheritance. The testator (Vito) has the option to exclude Maria from the Compensation obligation to be dispensed with, provided that this does not violate the children's compulsory shares. In order for Maria not to be subject to a compensation obligation, this must be so stated by Vito in a testamentary disposition. If there is no testamentary disposition and/or if the compulsory portions are violated, Simon and Tamara, who as children are both protected by compulsory portions, can bring an action for reduction in order to restore the compulsory portions. → Aspects of inheritance law

Inheritance taxes

Tax sovereignty in Switzerland lies with the cantons. Inheritance tax is a purely cantonal tax and is levied in all cantons except SZ and OW. The tax is due at the deceased's place of residence or, in the case of real estate/property, at the place where the property is located. As of January 2023, spouses and registered partners are exempt from inheritance tax (estate tax) in all cantons of Switzerland. In addition, most cantons also provide for a tax exemption for descendants (children, grandchildren). Individual cantons (AI, GE, JU, LU, NE, TG, VD) provide for a tax liability for descendants under certain conditions. In a few cantons, cohabiting partners are now also exempt from inheritance tax under certain conditions. The rate of taxation is determined by the degree of relationship to the deceased. The more distant the degree of relationship, the higher the rate. If you would like to know what the situation is in your specific case, we are happy to help you.

In the case of gifts of real estate during one's lifetime, there are certain restrictions in order for the real estate gains tax to be deferred. For the transfer to be considered a gift for tax purposes, the gratuitous component must amount to a certain proportion of the asset value. In some cantons, this gratuitous component is at least 25% of the asset value.

Between death and division

Many months or, in rare cases, even years usually pass between the death of the testator and the final division. If the deceased leaves several heirs, they form a community until the inheritance is divided. Community of heirs. The heirs become joint owners of the objects of the inheritance. This means that they jointly dispose of the rights of the inheritance, subject to contractual or statutory powers of representation and administration.

If a property (land, flat, house) is part of the estate, the community of heirs is entered in the land register as the new owner. One of the legal consequences of this entry is that all actions, such as the sale of the property, the conclusion of new contracts or the termination of existing contracts, require the consent of all heirs. This also applies if one of the heirs is also a tenant of one of the flats.

At Request of an heir or in the areas covered by the Cases provided for by lawthe competent authority may grant the community of heirs a Representation order respectively the Inheritance management order. For a representative to be appointed, the community of heirs must be incapable of acting. This is the case if the administration is considerably more difficult or even impossible (absence of heirs, inability of the heirs to administer the inheritance or to come to an agreement, or a severely disturbed relationship of trust between the heirs). Ordinary disagreements are not sufficient. To prevent disputes in the community of heirs as far as possible, we recommend appointing one or more executors. It makes sense to talk about this with the person you have in mind while you are still alive.

Legal succession to real estate

Real estate is part of the estate of the deceased, irrespective of a will or contract of inheritance. However, a testamentary disposition upon death can determine who receives what.

If the testator has not recorded his or her will (regarding the real estate) either in a will or in a contract of inheritance, the legal succession applies. The heirs must agree among themselves who will take over the real estate. It should be noted that the market value at the time of the division is decisive. The heirs all have the same claim on the inheritance matter. If the heirs cannot agree on the division, the matter shall be referred to sell and share the proceeds. As already mentioned, the legal heirs are furthermore mutually obliged to do everything for the Equalisation The deceased is entitled to bring what the deceased gave to them during his or her lifetime to be set off against their share of the inheritance.

How your financial planner can help you

Your financial planner is able to draw your attention to various aspects, including real estate ownership, in the sense of holistic planning. They will show you possible challenges based on your personal circumstances and can suggest initial solutions. Nevertheless, they do not replace lawyers or notaries. Certain topics, such as the drafting of an inheritance contract and in-depth questions on the reduction under inheritance law or the obligation to compensate, may exceed the scope of a financial planner. If such questions or mandates arise in the context of full financial planning, you will be referred to an appropriate lawyer or notary at the appropriate time for the final steps.

Further information on wills, marriage and inheritance contracts or intestate succession (parental system) in Switzerland can be found under the heading Inheritance and estate planning.