Why a inheritance contract?
In practice, an inheritance contract is usually created when a testator wishes to benefit his/her husband or wife (“spouse”) as comprehensively as possible. Often, the spouses wish to bequeath the entire estate to the surviving spouse so that he or she can continue to live the life to which he or she is accustomed to, and, in particular, remain in the shared home. Children should only benefit from the inheritance when the surviving spouse has also died. However, the children’s compulsory portion constitutes a barrier to such most-favoured treatment.
Ideally, the spouses would complete an inheritance contract together with their children, in which the children waive their share of the inheritance (especially their compulsory share) in favour of the surviving spouse. Whether this path is or can be chosen in individual cases depends on various factors, not least the age and will of the children. If it is not possible or not desired to include the children, there is nevertheless some room for manoeuvre.
In any case, the spouses should conclude a marriage and inheritance contract. In the event of the death of one of the spouses, the marital property must be settled first. The allocation to the marital property or to the estate depends on the applicable or chosen matrimonial property regime. The following are possible: (1) the participation in acquired property (ordinary matrimonial property regime), which also applies if nothing is agreed, (2) the separation of property and (3) the community of property. The spouses may agree in the marriage contract that the surviving spouse shall receive the assets earned during the marriage (in particular income and gains). In the contract of inheritance they may stipulate that the surviving spouse is to receive part of the inheritance in usufruct and the rest in property. This corresponds to the so-called most-favoured rule.
If this arrangement takes the form of a contract, this has the advantage that each spouse is bound by it and cannot change the arrangement unilaterally. However, such an approach may have unintended consequences.
Gifts After The Death of a Spouse
The spouses mutually agree in the inheritance contract what will happen to their assets upon the death of the first spouse as well as after the death of the second spouse. Since they can only change these arrangements jointly, an adjustment of the inheritance contract is only possible during the lifetime of both spouses. Upon the death of one spouse, the surviving spouse is bound by the inheritance contract provisions and can no longer unilaterally amend them.
What does this mean with regard to gifts, i.e. what applies if the surviving spouse wants to make gifts after the death of the first spouse?
Today, freedom to make gifts applies in principle. As of 1.1.2023, however, the principle of gift prohibition will apply, i.e. after conclusion of an inheritance contract gifts are generally not permitted. The only exceptions are customary occasional gifts. Gifts (including dispositions upon death) may be contested if they are incompatible with the obligations under the inheritance contract and have not been reserved in the inheritance contract (Art. 494 para. 3 CC). Gifts are incompatible with the obligations under the inheritance contract in particular if they reduce the benefits under the inheritance contract. This is the case with gifts to third parties or gifts to beneficiaries under the inheritance contract if they are made without crediting them against the share of the inheritance (provided for in the contract) or if they exceed it.
It should be noted that this new gift prohibition applies regardless of when the inheritance contract is concluded. For the assessment of admissibility, the date of death is relevant, i.e. the prohibition of gifts applies if the first spouse dies after 31 December 2022. Thus, if an inheritance contract was concluded several years ago and gifts were not (explicitly) permitted therein, such gifts may no longer be admissible or contestable, depending on the date of death of the first spouse to die.
Against this background, it should be regulated in the inheritance contract whether, in what amount and to which persons, gifts may still be made. It is therefore highly recommended to review your own, already concluded, inheritance contract and, if necessary, to add a corresponding clause. Our team will be happy to assist you.