Anticipated inheritance

An early inheritance can be an important option when it comes to distributing assets within a family. But what exactly does this term mean and what consequences does an early inheritance entail?

What is an early inheritance?

An early inheritance is a voluntary transfer by the decedent to one or more heirs. Here, part of the estate is transferred to the beneficiary or beneficiaries during the lifetime of the decedent. The early inheritance is often used by decedents as a tool to support their descendants by, for example, transferring property to the children during their lifetime. The early inheritance is not subject to any statutory form requirements, which means that even oral agreements are legally binding. However, it is advisable to record an early inheritance in writing.

The obligation to equalize and its consequences

In Switzerland, there is an obligation to equalize, according to which all heirs must be treated equally. This means that a favored heir must compensate for their early inheritance in the event of a later division of the estate to ensure an even distribution of the estate. The obligation to equalize applies according to the legislator for certain categories of transfers, such as dowry, outfitting, transfer of assets, or debt waivers. Excluded from the obligation to equalize are asset transfers that merely serve luxury, occasional gifts, and transfers that fulfill a legal obligation, such as parental maintenance obligations towards children.

When dividing the estate, the asset value can either be separated from the heir's own assets and added to the estate, or the corresponding value can be credited to the estate.  

The equalization value

It often happens that, for example, when a property is inherited early, its value increases between the transfer to the beneficiary and the death of the decedent. To determine the equalization value, the value of the early inheritance is added to the estate and the resulting sum is divided by the number of heirs. The favored heir must then pay the difference between the early inheritance and the calculated equalization value to the other heirs.

Tax consequences of an early inheritance

Early inheritances are subject to inheritance tax, which is regulated at the cantonal level. The declaration is the responsibility of the recipient. Also relevant and regulated at the cantonal level is the real estate gain tax. Often cantons grant a tax deferral so that the beneficiary only has to pay the real estate gain tax when the property is sold.

Benefits of an early inheritance

An early inheritance can reduce the tax burden of the decedent, since the property decreases. The beneficiary, in turn, receives assets earlier, which they can use purposefully. This can enable, for example, the financing of one's own home.

Disadvantages of an early inheritance

An early inheritance can result in the loss or reduction of supplementary benefits. The reason for this is that in the calculation of supplementary benefits, the early inheritance is treated as voluntary asset forfeiture and thus credited to the assets of the forfeiting party. An early inheritance can also lead to significant financial strain on the beneficiary due to the obligation to equalize.

Alternative to early inheritance

As an alternative to an early inheritance, parents can grant their descendants an interest-free loan. This is not subject to the obligation to equalize and can be reclaimed by the decedent at any time.

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