SWITZERLAND Law and Practice Contributed by: Olivier Sigg and Quentin Thorens, Walder Wyss
Swiss law at birth. The other “parent” does not imme- diately benefit from legal recognition but may adopt their spouse’s child at certain conditions. In particu- lar, the adopting parent must have raised and cared for the child for at least one year. This interim period is not legally protected from a succession perspec- tive, meaning that the child does not yet benefit from the statutory inheritance rights attaching to a legally recognised parent–child relationship. Once the adop- tion has been completed, however, the ordinary legal regime applies in full, and the child is treated in the same manner as a biological child for succession pur- poses. In situations involving remarriage, the rules of intes- tacy may also give rise to difficulties. Where a person dies leaving children from a first marriage and a new spouse, the estate will be divided between the chil- dren and the surviving spouse. Upon the subsequent death of that surviving spouse, however, the assets inherited from the first deceased will pass to the sur- viving spouse’s own legal heirs. This outcome may prove problematic and therefore calls for appropriate estate planning in order to avoid such a transfer of wealth outside the original family line. In particular, it is possible to arrange matters by will or contract so that, upon the death of the surviving spouse, the assets ultimately revert to the deceased’s own chil- dren. However, provided that they have not validly waived this right, the surviving spouse may dispose of their reserved portion of the estate as they wish. 11.2 Conflicts and Divergent Laws Conflicts frequently arise in cross-border family situ- ations where personal status, parentage or marital relationships are recognised differently across juris- dictions. This is particularly relevant for unmarried partners, same-sex couples whose status may not be uniformly acknowledged abroad, and children born through assisted reproduction or surrogacy arrange- ments concluded outside Switzerland. Swiss private international law provides several mechanisms to mitigate such conflicts. Succession is generally governed by the law of the deceased’s last domicile, subject to a permitted choice of the law of nationality. Foreign judgments and civil status deter- minations (such as divorces, adoptions or parentage
decisions) are in principle recognised, provided that they do not contravene Swiss public policy. Although this framework offers a degree of predictability, prac- tical difficulties still arise sometimes where multiple jurisdictions assert competing claims or where rec- ognition procedures are required. In any case, from a planning perspective, these risks underscore the importance of co-ordinated cross- border structuring. 12. Cross-Border Succession Planning 12.1 Taxation of Cross-Border Estates and Transfers Tax law is necessarily a component of good-quality succession planning, and it proves even more relevant at an international level given the risk of double taxa- tion. In the worst case, the estate might end up being taxed at a rate superior to 100%. Under domestic law, double taxation relief is limited. Mostly, cantons exempt foreign real estate from inher- itance tax. From a planning perspective, an important feature is that most cantons levy inheritance tax based on the domicile of the deceased, rather than on the domiciles of the heirs. This may result in situations of double non-taxation where the deceased’s country of residence taxes inheritances based on the heirs’ domiciles. However, at an international level, the most crucial rules are found in double taxation conventions (DTCs). Switzerland possesses a broad network of DTCs. Usually, two treaties are concluded with a country, one for income tax purposes and one for inheritance mat- ters. Both are relevant for succession planning given that gifts are mostly governed by income tax DTCs. Switzerland generally opts for the exemption method (as opposed to the credit method) in its DTCs. Specific considerations are required concerning France, with which Switzerland does not currently have an inheritance tax treaty, potentially leading to significant double taxation in cross-border situations due to the absence of treaty relief.
186 CHAMBERS.COM
Powered by FlippingBook