An Overview of Succession Law in Switzerland

Succession law in Switzerland is governed by the Swiss Civil Code. This means that a large percentage of any estate being divided must go to certain close relatives, regardless of the wishes of the deceased.

People in Switzerland can make a last will and testament stating how they wish some of their estate to be divided, but there are compulsory inheritance laws that designate a portion to any surviving spouse, children, and grandchildren.

Should any compulsory heirs, known in law as forced heirs, be disinherited or not receive their fair share of the estate, they have a legal right to contest the inheritance.

Dr Edgar Paltzer practices law in Switzerland and his preferred areas of practice include estate management, estate planning and settlement of disputes.

Assets and Liabilities

Beneficiaries who have been granted part of an estate following a death under compulsory Swiss inheritance laws are not forced to accept their inheritance. Forced heirs who do accept are required to accept not only assets but also any liabilities that fall under their portion of the estate.

Forced heirs have three choices open to them regarding their share of the estate. They can accept without question or reject without question. The third option is to accept subject to public inventory. This is an option that people may wish to take if they are unsure of the deceased’s financial situation and wish to discover whether their inheritance will be outweighed by debt before accepting.

Compulsory Minimum Share

Swiss law defines a compulsory minimum share of an estate that must be left to certain close relatives. These include spouses, registered partners, children, grandchildren, and parents.

Current legislation requires that at least 50% of the spouse’s share in the estate goes to a surviving spouse (i.e. 25% of total) or registered partner if there is one. Of the remaining part of the estate, at least 75% must be divided between children and grandchildren. This leaves only a small portion (37.5%) that can be distributed to other beneficiaries under the terms laid out in a last will and testament.

Legal heirs cannot be denied their fair share of an inheritance under Swiss law. Only the remainder of the estate left over after all forced heirs have received their share can be left to other beneficiaries through the writing of a will.

Partners, Children and Grandchildren

The main categories for forced heirship in Switzerland are partners (married or registered) and children. A total of 25% of all assets by value must be left to any surviving spouse or registered partner. Of the 50% share of offspring, three-quarters (75% of 50%) must be divided between offspring. Should any of the offspring of the deceased pass away before them, any grandchildren automatically become legal heirs to what would have been their parent’s share.

If a testator dies without children but with surviving parents, the parents inherit half of the statutory share in lieu of the children. Siblings of the deceased and any children they may have are not covered under the compulsory portion of inheritance law.

Should the testator wish to pass on assets to siblings or any other beneficiaries, they must be named in a last will and testament and can only have a share of the remaining estate once all compulsory inheritance gifts have been made.

Should a person with a spouse/registered partner die intestate (without last will), the surviving spouse/registered partner and the children/grandchildren each get a total of 50% of the estate. The testator would have to execute a last will (not die intestate) to give more to either category of heirs or to third parties out of the so-called free portion of 37.5%.

So, in the combination of surviving spouse/registered partner and descendants the forced heirship portions always look as follows (under Swiss law with 8/8 = 100%): 2/8 (=1/4=25%) for the surviving spouse/registered partner; 3/8 (=37.5%) for the descendants/children/grandchildren; and 3/8 (=37.5%) free portion to give away to third parties/charity/etc. or to increase the share of specific heirs.

Single people with no descendants (whose parents have already died) have the right to dispose of their assets in any way they wish by drawing up a valid last will and testament.

These rules will undergo changes starting in 2022 if the amended law is adopted.

Introducing Art Law and Legal Matters for Artists

 

Art law is a relatively niche area of the law, most often dealing with matters pertaining to ownership. This includes ownership of copyrights and physical ownership of pieces of artwork. Art law may also deal with the right to reproduce a piece of art such as a play or song.

Many solicitors who work in art law are experienced litigators, as a large part of art law is the settlement of ownership disputes. As part of the specialist services offered at his legal practice in Switzerland, Dr Edgar Paltzer provides advice to art dealers and collectors.

Copyright Law

Copyright law can be a complex area and the regulations may vary between jurisdictions. Copyright laws typically last for the lifetime of the artist, plus a specified number of years following their death. After this time, the work is classed as being in the public domain, which means it can be reproduced or used by anyone without seeking permission from the owner.

Copyright gives the owner of the piece of artwork or intellectual property the exclusive right to copy or reproduce the work. The copyright owner is the only person or entity with permission to distribute, rent, lend, or otherwise issue copies of the work to the public.

They are also the sole entity with the right to transmit or broadcast the work under copyright, and permission must be sought from the copyright owner for anyone else to use the work in any of the above ways.

Art Contracts

Artists often enter into legal contracts with clients to produce certain pieces of work within a timeframe and to exact specifications. These contracts are binding and should therefore be written, signed, and witnessed before any work takes place.

There are certain rules and regulations that apply in specific jurisdictions, so any artist entering a contract should make themselves aware of the laws pertaining to each jurisdiction involved in the contract before signing.

An example of this would be the law which states VAT is applicable to all digital services and products sold in the EU. In this case, the artist needs to factor the cost of this before working out the terms of the contract.

Art Transactions

Art transactions may take place between the original artist and a buyer. They may also take place between two or more collectors or investors. Buyers and sellers may be private individuals, or they may be entities such as art galleries or museums.

Art lawyers can provide pre-emptive advice to ensure each sale goes through according to the terms of the contract. Art sale contracts can be complex, as they may include intricate details regarding how, where and when the art can be displayed to the public and are not always simply about transferring property from one owner to the next.

Having legal advice from the start of any potential art transaction can help avoid the possibility of future litigation.

The Business of Art Collecting

Art collecting is such a big business that approximately $11 billion in assets are owned by just the top five global art collectors. The most valuable private art collection in the world is valued at approximately $3 billion, owned by Ezra and David Nahmad.

While most art collectors will not spend quite so much, there are many people who include fine art in their investment portfolio. Art is an alternative investment, which makes it good for diversifying portfolios. The right art can increase significantly in value over time.

Having access to a legal professional who specialises in art law can help make art a less risky investment.

 

Securing the Legacy: Succession Planning for Family Restaurants

A family restaurant is often more than a career – for many, it is a passion. Securing the legacy of that restaurant is therefore paramount to ensure the business can survive throughout the generations.  

Planning ahead and seeking the right advice can help ensure the transition down the line goes as smoothly as possible and future generations can carry on the family tradition and maintain the business.  

Dr Edgar Paltzer advises on succession planning for family establishments as part of his attorney-at-law practice. A definition of succession planning for family businesses can be found in the PDF attachment to this post.  

Building a multigenerational legacy begins with having clearly defined objectives and developing strategies for moving forwards well in advance. 

Planning for Retirement 

Succession planning is part of planning for retirement. When a family business is involved, this can be more complex than other types of succession planning, as family relationships and dynamics come into play as well as business-related factors.  

Over 70% of family businesses fail to make a successful transition to the second generation, with the most common issues being family discord or the burden of taxes.  

It may be necessary to alter the structure of the business to ensure it can be passed on to the younger generation. As sole proprietorships and partnerships are classed as personal possessions, the business as an entity cannot be easily willed or passed on. However, a corporation can continue to operate following the retirement or death of the owner. 

Defining Succession Planning for Family Businesses 

Long-Term Transitions 

Ideally, a transition of ownership of a business such as a family restaurant should be a process that is done over a period of time. The potential inheritors of the business should have the opportunity to learn the business from the ground up, by working there and experiencing all aspects of what make the business successful and unique. By bringing in the person or people who will ultimately be taking over, restaurateurs can ensure the leaders of tomorrow are as knowledgeable and passionate about the business as they are themselves.  

Training up the younger generation gradually ensures that when the time comes for them to take the reins, they know the business inside-out and have the skills to begin acting in a more managerial role. This also helps to keep transitions smooth for customers and other employees, without whom the business would soon fail. 

Stay on Top of Finances 

Passing on a business to a child or other relative is often as much an act of love as it is a professional business decision. We all want the best for our children, so ensuring their legacy is in the best possible financial shape at the time of the transition makes sense both professionally and personally.  

This includes ensuring that debts are minimised, tax bills are paid on time, and that there are properly thought-out plans in place for ensuring future revenue. It can help to look at the finances of the business from the perspective of a potential buyer – if it is a company that people would be willing to buy, then it is probably in good financial shape.  

Restaurant business revenue often fluctuates with the seasons, so future leaders should be prepared for how to get through the leaner months. 

The short video attachment looks at the benefits of seeking an outside perspective to ensure everything runs as smoothly as possible when considering passing on a family business. 

Locating Family Offices: The Benefits of the Bahamas and Switzerland

The location of a family office can play a key role in how effective that office is at managing family wealth. International legislation such as permanent establishment regulations and controlled foreign company rules determine the opportunities for the office to be able to structure the wealth of a client in the most beneficial way, accounting for numerous factors including tax liability, immigration, and residency. The PDF attachment contains an overview of the services provided by a typical family office.

Any high-net-worth individual or family should consider employing the services of a family office to help manage their wealth. Family offices and the solicitors who work there have the specific expertise required to manage their requirements, providing a complete solution for wealth management that includes investment advice but can also handle a range of non-financial issues for the household.

Attorney-at-law Dr Edgar Paltzer provides a second opinion service for family offices on legal matters and is experienced in succession planning for family establishments. The Bahamas is one of the world’s most popular locations for the modern family office, offering numerous advantages for long-term strategic financial planning.

Wealth Management: The Family Office 

A Growing Business in the Bahamas and Switzerland

The Bahamas and Switzerland offer several advantageous opportunities for family offices to be able to assist their clients in wealth management in the most beneficial way. These jurisdictions have direct proximity to several of the world’s leading financial hubs with direct flights to major cities including London, New York, Toronto, and Miami.

The region also provides opportunities for families and wealth advisers to be able to purchase property or take up residence in the area if it proves financially advantageous. The regulatory and legislative regime in the Bahamas and Switzerland allow for full compliance with financial regulations while creating the most efficient and effective family office structures. There are multiple skilled professionals working and living in the Bahamas and Switzerland, creating a pool of readily available experts in financial planning and all legal aspects of wealth management.

The infographic attachment details the world’s largest family offices currently operating, ranked by total assets under management.

The World’sLargest Family Offices by Assets Under Management

The Cost of a Family Office

The structure of the family office required depends mainly on the value of the assets to be managed, the volume of work required, and the attendant cost. As a general rule of thumb, effective wealth management services should cost around 1% of the total value of the assets being managed.

A family requiring somewhere in the region of £20 million in assets to be administered may find it more financially beneficial to have a small in-house team employed to manage the day-to-day administration and bring in third-party advisers or specialists as and when required.

A family with £20 billion may find it more financially viable to have everything done in-house. Bringing in third-party advisers can also expand the breadth of knowledge available to the team – a single in-house lawyer may only specialise in certain areas, while having a team of external legal representatives that can be called upon increases the scope of the work that can be done.

Having a single comprehensive structure dedicated to the wealth management of one family (or several individual families) helps ensure affairs are kept stable, obligations are met, and evolving opportunities are spotted and taken.

A broad definition of wealth management services can be found in the short video attachment to this post.

 

The Importance of Writing a Last Will and Testament

 

A last will and testament is a legal document that details the last wishes of the deceased, particularly concerning the distribution of assets after death. A will can also contain instructions to ensure children are provided for and to name a guardian for dependents, as well as details of the type of funeral the deceased would prefer.

There are many reasons why writing a will at an early age can be beneficial – anyone who dies without leaving a legal last will and testament will find the distribution of their assets, care of their children, and funeral arrangements left to the courts to decide. Despite the importance of this, as many as 60% of people are estimated to not have a valid will. Some more statistics on wills can be seen in the embedded infographic.  

Last Will andTestament: Statistics

Attorney-at-law Dr Edgar Paltzer helps clients write their wills as part of the estate planning services offered by his legal practice based in Switzerland. A qualified estate planner has the knowledge and expertise to help people write a last will and testament that has the best chance of ensuring the wishes of the deceased are carried out following their death.

Probate

Whether someone has written a valid will or died intestate, in Anglo-Saxon jurisdictions the probate process still needs to be followed after a death. This is the name given to the legal process of breaking up an estate following a death. Having a will makes the probate process far faster and more efficient, as the courts have the wishes of the deceased displayed in black and white. Where there is a valid will and there are no unforeseen issues with the estate, probate can be a relatively simple process. However, when a person dies intestate, probate can be lengthy, and complicated and the results may not be to anyone’s satisfaction.

The short video attachment explains more about the probate process.

Taxes

A properly executed estate plan which includes a last will and testament not only makes the legal process simpler; it can also reduce the tax liability on the estate of the deceased. The rules on inheritance tax are different depending on which jurisdiction the deceased resided in, but in most cases, there are ways to minimise the amount of inheritance tax that is required to be paid.

Typically, leaving assets to a spouse will either remove inheritance tax completely or vastly reduce the bill. Leaving assets to direct relatives such as children and grandchildren will usually reduce the tax liability compared to leaving those assets to people outside of the family.

Estate planning attorneys can help navigate the complex rules and work out the most tax-effective way of leaving assets to loved ones depending on the jurisdiction.

Legal Requirements for Writing a Valid Will

Disinheriting

Some people may find it important to write a will not only to ensure some people benefit, but to ensure certain people do not. It is possible to disinherit individuals who would otherwise be classed as beneficiaries should a person die intestate, by specifying within the will that they are not to benefit. In civil law jurisdictions forced heirship rules limit these possibilities.

Writing a will at a young age does not preclude changing it at any point throughout life – wills can be written and rewritten and the most recent, validated form will be the one the courts honour. The PDF attachment outlines the most common legal requirements for writing a will that is valid in the eyes of the court.

How COVID-19 Has Made Succession Planning More Important Than Ever

Having an emergency succession plan in place is important for any business. In the current climate, with COVID-19 still rampant and death tolls in many areas on the rise, it is more important than ever before.

Even outside of the extremes of death, it is possible in any company that several of the senior leaders could be ill or isolating at the same time, leaving the ship without a captain unless a plan has been put in place. Succession planning is one of the specialities of Dr Edgar Paltzer at his Swiss legal practice.

At this time of global crisis, succession plans need to have back-ups to ensure companies can continue to operate efficiently even if multiple members of the senior management team become unavailable for long periods of time. Being prepared to meet crisis head-on is the best way to weather any storm.

The embedded infographic outlines five ways in which succession planning can help protect a business during the pandemic.

COVID-19: Five Ways Succession Planning Can Help Protect a Business During a Pandemic

Enterprise Risk Management

One of the most important components of enterprise risk management in planning for the unexpected loss or absence of a key member of the management team. When a key team member is suddenly unavailable and there is no contingency plan in place, this can have a negative impact on operations, short-term stability, employee morale, and even share prices.

Effective risk management practices include identifying individuals within a company who have the required skills to be able to jump into someone else’s shoes at short notice and fill the gap efficiently. These individuals need to be competent in the role and also have the necessary experience to reassure investors and other stakeholders that they will be able to hold down the fort.

Defining Criteria

The first step in selecting potential interim successors is defining the criteria required to fulfil the role. The strongest individuals will be those that boost or at least maintain employee and shareholder confidence. Continuity will be important, so the chosen successors need to be on board with the current operational strategies and prepared to follow guidance from their predecessors, at least in the early days, to help retain that confidence.

Outside of this requirement, different criteria may be prioritised depending on the nature of the crisis – for example, in an economic crisis, the CFO may be best placed to take over. With the business landscape changing in the wake of the current pandemic, emergency successors need to be strong leaders able to guide in times of uncertainty.

The key priorities of the business may have shifted drastically in recent months, so this needs to be accounted for when determining emergency succession criteria – these may not be the same criteria used for longer-term succession plans already in place.

The short video attachment looks at how succession planning is rapidly becoming a key part of all businesses, large or small.

Delineating Responsibilities

Emergency succession plans may involve a reshuffling of responsibilities, so each role may look different to how it did before the crisis. To help with this, responsibilities for each new role should be delineated clearly and concisely for all involved parties, so everyone understands who is responsible for what. This is not a time for office politics – the team needs to be able to pull together and support one another until business returns to some semblance of normalcy.

The PDF attachment looks at several ways in which companies can support emergency interim successors during times of crisis.

Business: Supporting Interim Successors in Times of Crisis

 

Common Causes of Inheritance Disputes and How to Solve Them

An inheritance dispute occurs when one or more of the beneficiaries of a will or family members of the deceased feel that they have been treated unfairly and not been given their fair share of assets. With increasing numbers of parents stating they do not plan to divide their assets equally among their offspring when they pass away, inheritance disputes could become more common.

There are systems in place to help resolve inheritance disputes, and there are steps that can be taken during the will writing process that can help each beneficiary understand why they are being allocated their specific portion of assets.

Dr Edgar Paltzer operates a legal practice in Switzerland and deals with inheritance disputes regularly. Disputes are more likely to arise when a person dies intestate – some of the general inheritance rules surrounding intestacy can be found in the PDF attachment to this post.

Intestacy and Inheritance Rules

Causes: Inadequate Financial Provision

Inheritance disputes can arise when inadequate financial provision has been made for one or more members of the family. Certain individuals have a legal right to be included in a will, such as heirs with compulsory shares. Disputes can also arise when adult children feel their share of the assets allocated is unfair.

Causes: Intestacy

The rules of intestacy are very black and white: assets are divided according to family relationships, regardless of the actual nature of those relationships, For example, if someone dies intestate with two surviving biological children, one of whom has cared for that parent and had a close relationship while the other has been estranged for 20 years, the rules still favour an equal division of assets which could cause a dispute.

Causes: Blended Families

With the increasing number of blended families, writing a will is not always as straightforward as dividing assets among children. The rules of intestacy do not account for stepchildren or cohabiting partners, so these people will need to be included in a will if they are to receive a share of the deceased’s estate following death.

The embedded infographic looks at some inheritance statistics from a survey conducted by Charles Stanley.

Inheritance PlanStatistics

Solutions: Estate Planning

Careful estate planning prior to death can help reduce the likelihood of siblings disputing the outcome of a will. When wishes have already been discussed and clarified before death, offspring are less likely to take legal action as they will have been adequately prepared. For more personal items, many people prefer to distribute them before death as gifts, to help avoid rivalry over who gets them once they have passed away.

Solutions: Mediation

Where disputes arrive after death, the family members involved could try mediation to resolve the issue without having to go down the legal route. With mediation, an experienced professional helps all parties to set their objectives and make compromises that result in everyone being happy with the results. Some further information regarding mediation for inheritance disputes can be seen in the short video attachment.

Solutions: Letter of Instruction

A letter of instruction is not a legally binding document but it can help settle disputes over assets by clearly defining the wishes of the deceased regarding each individual item. By detailing who should be getting what clearly and concisely, many parents can help avoid disputes over assets after their death.

If these methods do not work then legal disputes may end up in court, which can be a lengthy and expensive procedure that eats into the value of the assets being fought over.