Foreign Nationals Living in Switzerland

International successions are tricky. For example, Germans living in Switzerland are confronted with (at the very least) German inheritance law and the EU Succession Regulation and Swiss (national and international) private law (the Swiss Civil Code and federal act on private international law (PIL)). This exposes them to the latent risk of legal conflicts of jurisdiction, with reference to competing jurisdictions, and authorities applying the law. If you want to avoid a complicated and protracted estate settlement, you should take the necessary and appropriate precautions under inheritance law.

This need for careful estate planning is illustrated below with reference to the PIL and the EU Succession Regulation, in view of the relationship between Switzerland and Germany. We are also taking this opportunity to mention one or two further possible issues to be considered in estate planning.

Which law applies?

In order to gain clarity about the possible legal consequences of death on one’s assets, the first step is to understand which law governs this question.

The law that is applicable to the succession and the division of an estate is usually determined by the nationality, domicile, or last habitual residence of the deceased. From a Swiss perspective, the law of the last place of domicile is generally applicable (however, a foreigner can also choose the law of his or her home country, see below). The last place of domicile is considered to be the place where the deceased was staying with the intention of staying permanently (i.e. a forward-looking approach is applied). Therefore, if the deceased had his/her last domicile in Switzerland, his/her estate will be subject to Swiss (inheritance) law (from a Swiss perspective).

From a German perspective, and in accordance with the EU Succession Regulation, the succession is governed by the law of the country in which the deceased had his/her habitual residence at the time of death. The decisive factor is the actual centre of life, which is to be determined based on an overall assessment of the circumstances of the deceased person in the years preceding his/her death (i.e. a past-based approach is applied). Therefore, the habitual residence is not necessarily identical to the last place of domicile.

For example, if a German person lived and worked in Switzerland and had his/her centre of life there, from both a Swiss and a German perspective, it would be presumed that his/her last place of domicile or habitual residence would have been in Switzerland. This means that both the German and Swiss authorities consider Swiss law to be applicable in this situation. It can become more complicated if a German employee lives and works in Switzerland, but spends every weekend, i.e. his/her free time, in Germany, due to his/her social connections such as family and/or friends being situated there.

As the law is applicable in accordance with the last place of domicile or centre of life, it is not always best suited to the interests of the testator. Both Swiss and German law as well as the EU Succession Regulation, provide a choice of law (in favour of the home country law). In order to avoid any ambiguity as to which law is applicable, the above-mentioned German employee should therefore choose one of the options of law.  

Which authority or court has jurisdiction?

The question surrounding which authorities (courts) have jurisdiction might not seem important at first glance, however, this becomes particularly important in the case of disputes between heirs over an estate.

A problem can arise, for example, when a German testator dies with assets in both Germany and Switzerland, and the authorities of both countries consider themselves to have exclusive jurisdiction at the same time.

Swiss law also generally bases the question of jurisdiction on the last place of domicile of the deceased. Therefore, from a Swiss perspective, the authorities and courts of the last Swiss domicile of the deceased are competent for all inheritance proceedings (including disputes between heirs) unless a foreign authority declares itself to have exclusive jurisdiction over local assets. In contrast, the EU Succession Regulation links the question of jurisdiction to the last habitual residence of the deceased, as for the applicable law. If the last habitual residence is in a third country, such as Switzerland, the EU Succession Regulation does in principle, not provide for jurisdiction in favour of a Member State. If the German deceased also leaves assets in a Member State, that Member State will nevertheless have jurisdiction over the entire estate pursuant to the EU Succession Regulation. There is therefore a risk of competing jurisdictions.

In most cases neither Swiss law, nor the EU Succession Regulation, allow for a deviation from the rule of jurisdiction by means of a will or an inheritance contract. However, pursuant to Swiss law one may deviate from the rule by means of a jurisdiction agreement, i.e. a written agreement between the testator and the interested parties (i.e. the heirs existing at the time of the agreement). However, as the EU Succession Regulation only recognises agreements on jurisdiction in favour of a Member State, but not in favour of a third country, great care and good estate planning are required. In addition, given the potentially large number of contracting parties, a jurisdiction agreement is unlikely to be a practical instrument.

What is the difference between Swiss and German inheritance law?

If a testator has the option of choosing the law applicable to his/her estate, he/she must consider which law best suits his/her wishes. A choice of law requires an understanding of the advantages of each legal system and the differences between the (optional) laws. At first glance, the differences between Swiss and German inheritance law appear to be rather minor. On closer inspection however, there are certain differences that can have a significant impact, depending on the circumstances.

There are significant differences, for example, in the right to a compulsory portion. This is due to the fact that the estate, or rather the assets included in the estate, are determined or calculated differently. The forms of available disposition also differ. Although both Swiss and German law recognise the possibility of an inheritance agreement and a will, German law also allows the creation of a joint will (the so-called Berliner Testament), which allows the spouse to be the main beneficiary. A joint will is not permitted under Swiss law; a marriage and/or inheritance agreement is required for this purpose. Finally, the (different) influence of the matrimonial property regime may also be important for the choice of succession law. If the spouses do not choose a matrimonial property regime, the statutory matrimonial property regime of participation in acquired property applies under Swiss law. Upon the death of a spouse, unlike under German law, there is first of all, a division of the matrimonial property, i.e. a division of the matrimonial property between the surviving spouse and the heirs of the deceased spouse (including the surviving spouse). Only in a second step is the estate divided. Matrimonial property law can therefore have a significant impact on the size of the estate. German law on the other hand, does not recognise this form of settlement in the statutory matrimonial property regime of community of accrued gains and resolves the settlement in the event of the predecease of a spouse by means of a lump sum equalisation of accrued gains.

It is therefore necessary to consider a case-by-case basis approach, and/or which law of succession would be most appropriate for the parties involved.

So, what should you do as a foreigner residing in Switzerland when planning your inheritance?

The first step is to think about what you want to happen to your estate after your death and what you want to achieve with your disposition(s) (will, inheritance agreement). Especially in cross-border inheritance cases, the latter question is of considerable importance in assessing how to proceed. As already mentioned, whether and how the intended effects under the law of succession are achieved depends mostly on the applicable law. Accordingly, it is necessary to examine which (optional) law offers the best possible structuring options in order to achieve the desired effects under inheritance law. The question of the extent of freedom of disposition, and in connection with this, the relevant amount to be calculated for determining the estate will often play a significant role.

When considering implementation options, the testator’s individual situation must always be at the forefront. This requires a holistic approach that does not only focus on inheritance law aspects. If you are married or in a registered partnership, it is essential to take into account your (matrimonial) property situation in order to plan your estate carefully. In addition to any tax considerations, you will also need to take into account any arrangements you have made during your lifetime.

If you have any further questions in this regard, please do not hesitate to contact us. We will also assist you in choosing the most suitable procedure for your needs, if necessary, with the help of a correspondent lawyer in your home country.

01.03.2024