Advance on inheritance in Switzerland: Passing on assets while you’re alive

With an advance on inheritance, you can transfer part of the inheritance to your descendants while you are still alive. When doing so, legal and tax aspects should be taken into account. In this article, you will find tips on how to best handle advances on inheritance.

There are many reasons why your own assets can grow significantly from one day to the next. One of these is an advance on inheritance. Plan early and in detail how you would like to use these assets and how much of them you would like to set aside for later – for example, with an investment.

What is an advance on inheritance?

If a testator pays out part of their own estate early to the heirs, this is referred to as an advance on inheritance. This can be used to support descendants or other persons entitled to inherit with tangible or monetary assets. For example, you can transfer your home to your descendants while you are still alive or financially support your children in acquiring residential property.

The advance on inheritance is governed by Swiss inheritance law in the third part of the Swiss Civil Code (SCC). If assets are paid out, the advance on inheritance can be made informally. For real estate, a written, notarized contract is required. With a written agreement, you also make clear arrangements for assets and can avoid conflicts.

Compensation obligation: What should be borne in mind when considering an advance on inheritance?

If you give an heir an advance on inheritance, their entitlement must be offset in the event of an inheritance. The beneficiaries thus receive a smaller inheritance or the other heirs receive a compensation payment. This creates a level playing field. However, the compensation can be waived at the request of the testator. But in this case, the compulsory portions of the remaining heirs may not be violated.

The difference between an advance on inheritance and a gift

An advance on inheritance is a gift to a person entitled to inheritance that is subject to compensation. A gift , on the other hand, is a free-of-charge transfer of an asset to third parties who are not entitled to inherit. Unlike an advance on inheritance, a gift must be made in writing. If you give away a property, public certification by a notary is required.

What impact does an advance on inheritance have on taxes?

An advance on inheritance as a form of gift is subject to gift tax and is regulated by the cantons. The tax amount varies depending on the degree of relationship, canton, and amount of the advance. For example, spouses and descendants are exempt from inheritance tax in many cantons, while allowances may apply to others. You can use the Federal Tax Administration’s tax calculator to calculate your inheritance taxes.

Advantages and disadvantages of an advance on inheritance

An advance on inheritance has the following advantages:

• As a testator, you pay less wealth tax because you are passing on part of your assets.
• You can support your descendants and relatives financially. It is worthwhile for heirs to invest funds that are not needed for current expenses in the financial markets. So they can make more out of the capital.

This is offset by the following disadvantages of making an advance on inheritance:

• If part of the inheritance has been transferred, it cannot generally be reclaimed.
• If real estate is transferred as part of an advance on inheritance, it is subject to real estate gains tax (in German) and property transfer tax (in German), depending on the canton.
• Assets transferred through an advance on inheritance are taken into account when calculating the entitlement to supplementary benefits. As a result, the supplementary benefit can be reduced or terminated altogether. This must be taken into account when planning an advance on inheritance.

Our tip: Think about your future reserves

An advance on inheritance is a financial decision with far-reaching consequences. Good planning with budget analysis as well as income and wealth planning is important so that you have sufficient reserves at your disposal later on. Both as a testator and an heir, it’s worth exploring investment options with the surplus assets in order to make more out of your capital in the long term.

If you decide to make an advance on inheritance , you should bear in mind that you cannot reclaim it. You should also regulate the advance in a written agreement and set out the obligation to pay compensation.