Case study: A Austrian-French couple got married in Austria and moved with their common children from Austria to Switzerland due to a change of jobs. The couple did not make any testamentary dispositions. The husband dies in an accident. He leaves movable assets as well as real estate in Austria, France, and Switzerland.
Q: Which assets fall into the husband’s estate?
A: If the spouses did not conclude a pre- or a post-nuptial agreement, Swiss matrimonial property law, retrospectively to the date of the marriage, applies automatically upon their relocation to Switzerland. Consequently, the Swiss default regime of participation in acquisition or “Errungenschaftsbeteiligung” applies.
Under the regime of participation in acquisition, each spouse has two types of properties: the individual property (e.g. pre-marital assets and gifts or inheritance received during the marriage) and the property acquired during the marriage (e.g. income from work and earnings from individual property).
If one of the spouses passes away, the separation of the matrimonial goods take place: the spouses’ assets of all types are determined, each spouse takes back his or her individual property and each spouse is entitled to half of the other’s net acquired property (so-called surplus or “Vorschlag”). The husband’s estate thus encompasses his individual property and half of the surpluses.
Q: Which inheritance law applies?
Since there is no last will and the husband’s last domicile was in Switzerland, Swiss inherited law applies. This also applies to the real estate in Austria and France. By law, the estate is divided equally between the surviving spouse and the children.
Q: Could the husband have secured his wife financially better in a last will?
By law, the surviving spouse and the descendants are entitled to a compulsory share of the estate. The compulsory share is the part of the legal share of the inheritance that cannot be withdrawn from them. The children’s compulsory share is 3/4 of their legal share and the wife’s is 1/2 of her legal share.
This means that the children must receive 3/8 and the surviving spouse 2/8 out of the estate. Within this compulsory share limit, however, the husband could have disposed differently by means of a testamentary disposition (last will or contract of inheritance).
For example, he could have given more to his wife by allocating the so-called “freely available quota” to her (i.e. 3/8 of his estate). Or else, he could have allocated 1/4 of the entire estate to his wife as inheritance and the remaining 3/4 of the estate, which must go to the joint descendants, for usufruct. The children would thus only be entitled to bare ownership of 3/4 of the estate.[2]
Q: Could the husband have avoided the application of Swiss inheritance law and thus the application of forced heirship?
Yes. As an Austrian-French dual citizen, the husband had the option to choose French inheritance law (law of his citizenship state) in a testamentary disposition and deprive the children of their compulsory share. This choice of law would also have been possible under the European Inheritance Regulation.
However, as soon as the testator is (also) a Swiss citizen at the time of his or her death, this option does not (currently) exist.
What else needs to be considered in cross-border inheritance planning?
For estate planning, the jurisdiction of the courts and authorities must always be considered. In the case at hand, the husband owned real estate abroad, it is therefore possible that both the Swiss and French estate authorities could declare themselves competent.
The potential estate assets, in particular the special rules for the location of real estate, must therefore always be included in the estate planning. Furthermore, it may also be relevant whether company agreements with inheritance law clauses are to be taken into account. Finally, tax law aspects must be included in estate planning at all times in order to avoid unfavorable results.
Q: What applies to registered partners?
If the couple does not conclude an agreement, the Swiss property regime of separation of property automatically applies. This means that each partner disposes of his or her own assets and is liable for debts with their own assets.
If one of the partners passes away, each partner takes back his or her assets. The estate of the deceased partner thus only encompasses his or her own assets. With regard to the subsequent inheritance division, the same applies as for married couples.
Recommendation
To minimize the risk of unexpected and problematic results, a careful and early estate planning or a review of existing planning documentation is essential when moving to Switzerland. A conscious decision for or against a choice of law as well as the harmonization of matrimonial property law and inheritance law are strongly recommended.
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