Real Estate in Estate Planning

Q: Should I leave my house to my heirs through inheritance, or give it to them as a gift during my lifetime?

Whether inheritance or a lifetime transfer is more appropriate depends on the family and financial situation. It is important to clarify the implications for the other heirs at an early stage.

Q: What happens to a property if there are several children?

If several children inherit a property together, a community of heirs is initially created. Decisions regarding sale, rental or personal use must generally be made jointly.

Q: What factors should be considered when transferring a house as an advance inheritance?

In this case, particular attention should be paid to the valuation of the property, the issue of hotchpot, and the equal treatment of the other descendants.

Q: How can the spouse remain in the house?

A combination of matrimonial property and inheritance law arrangements often make it possible for the spouse to remain in the house. In addition to transferring ownership, granting usufruct or a right of residence may be considered. Individual planning is particularly important in this context.

Q: What happens to a holiday home abroad?

Holiday homes abroad are often also subject to the legal provisions of the relevant country. Inheritance law and tax questions should therefore be reviewed at an early stage and, where necessary, coordinated with local advisors.

Q: Is an executor necessary?

An executor may be useful where family circumstances are complex or where conflicts between heirs cannot be ruled out.

Q: How can disputes among heirs be avoided?

Early discussions, transparent arrangements and careful estate planning create a solid basis for a conflict-free division of the estate.

For many, a house is defined less by its walls than by the special memories created within them. Family celebrations, shared summer evenings, and the comfort of always having a place to return to. For precisely this reason, real estate often carries not only significant financial value, but also considerable emotional value.

When wealth passes from one generation to the next, however, different expectations and interests may collide. Should the property remain in the family? Should it pass to one child or to several children? Or should it be sold? Addressing the transfer of real estate at an early stage and putting clear arrangements in place can create transparency within the family, prevent misunderstandings and make the later administration of the estate easier for the heirs.

The following overview shows the options available for transferring real estate and how to avoid conflicts among heirs.

Pass on a house by inheritance or transfer it during your lifetime?

If you wish to pass real estate to the next generation, it is advisable to consider at an early stage whether the property should be transferred during your lifetime or only upon your death. A sale may also be appropriate.

Transfer upon death

If the property remains in your ownership until death, it forms part of your estate and passes to your heirs. If there is more than one heir, a community of heirs is initially created. This community must decide unanimously on the future use of the property.

The advantage is that you retain full control over your property until the end.
The disadvantage is that, without clear arrangements, the later division of your estate may lead to disputes among family members.

Advance inheritance

Many testators decide to transfer real estate to their children during their lifetime. However, this may have implications for the later division of the estate.
If one child receives a property, the question arises as to whether, and to what extent, its value must be credited against that child’s inheritance share. This so-called hotchpot should be defined clearly and at an early stage. This helps reduce uncertainty regarding the equal treatment of siblings and lowers the risk of later conflict.

Practical example

Many conflicts arise because no provision has been made as to which value should be decisive for the property. If, for instance, the property was valued at CHF 1 million at the time of transfer and at CHF 1.8 million upon inheritance, different expectations may arise among siblings. It is therefore all the more important to determine at the time of transfer how the property is to be valued and how it is to be taken into account in the estate later on. Unless otherwise specified, the relevant value is the value at the time of inheritance.

What matters is not always that estate planning results in a distribution of assets that is identical in monetary terms, but rather that the arrangements are understandable, transparent and legally sound.

Selling the property during one’s lifetime

Depending on your personal circumstances, selling the property may also be appropriate. This may be the case in particular if you are already planning to move homes later in life or if your descendants have no interest in taking over the property. The sale proceeds can then be incorporated into your estate planning.

Regardless of which solution is considered, the next generation should be involved at an early stage. An open conversation creates clarity regarding the expectations and needs of all parties involved and forms an important basis for further planning.

Talk to an Expert

A conversation with the heirs does not have to be held alone. Our experts can support you in assessing the various interests involved and developing sustainable solutions.

How can the surviving partner remain in the property?

Couples often wonder how the surviving partner can remain in the shared property without the division of the estate causing financial or familial disputes.

Married couples

Married couples have various options under matrimonial property law and inheritance law. By combining a marital agreement, will and inheritance agreement appropriately, the surviving spouse can often be placed in a significantly stronger position. Depending on the circumstances, targeted matrimonial and estate planning can make it more likely that a jointly owned property will remain with the surviving spouse, thereby strengthening their financial security.

Unmarried live-in partners

Unmarried live-in partners are, in contrast, significantly less protected by the law than spouses are. Without appropriate arrangements, the children may be able to assert claims to the estate immediately upon death. This can make the continued use of the property by the surviving partner more difficult or even call it into question. Early planning is therefore particularly important.

If your liquid assets are insufficient to settle the default inheritance quota of your descendants when transferring the property to your spouse or unmarried partner, a right of residence or usufruct in favor of the surviving partner may be considered, depending on the circumstances.

A right of residence allows the surviving partner to continue living in the shared property, even though ownership has already passed to the next generation. A usufruct often goes further than that. The beneficiary may continue to use the property personally or rent it out and retain the income. This can often improve the financial protection of the surviving partner.

Particularly in blended families or where a high proportion of wealth is tied up in real estate, an individual assessment of the various options is advisable.

Which provisions should be included in a will or inheritance agreement?

To avoid later conflicts, various provisions may be included in a will or inheritance agreement. These include in particular:

Partition instructions: The testator may specify how certain assets are to be divided among the heirs.
Allocation of a property: A property may be allocated to a specific heir, with its value generally being credited against that heir’s inheritance share.
Valuation provisions: Clear instructions on how the property is to be valued can help avoid later discussions.
Instructions to sell: If it is foreseeable that joint use would not be appropriate, the sale of the property may also be provided for. The proceeds are then distributed among the heirs.

Property disputes and how they can be prevented

Most conflicts do not arise because of the property itself, but because of differing expectations among those involved. Early discussions, transparent arrangements and professional estate planning can help prevent later disputes.

Holiday homes abroad

From a tax and inheritance perspective, owning a property abroad creates a link to the country in which it is located. In the event of inheritance, oftentimes the laws of this country apply to the property. One way to simplify estate planning could be drawing up a special will that is limited to your assets abroad.

As a general rule, this process should be clarified with a local legal advisor. It is important that the estate planning in Switzerland does not conflict with the special will abroad.

Appointing a neutral executor

In complex situations, or where heirs may be unable to reach an agreement because of differing interests, it can be helpful for the estate administration to be handled by a neutral executor. The executor is responsible for representing the testator’s wishes and is tasked with administering the estate, paying the testator’s debts and carrying out the division of the estate in accordance with the instructions given by the testator.

An executor must be appointed by the testator during their lifetime in a testamentary disposition. If the testator has not appointed an executor, the heirs may appoint a representative. This person administers the estate and supports the heirs in the estate administration process.

Conclusion

A property is often far more than just an asset. It is the center of family life, a place of memories and frequently one of the most important components of an estate. Whether by inheritance, advance inheritance, gift or sale, those who define the desired arrangements in good time, clarify valuation questions and involve the family can help prevent future conflicts. Especially where there are several children, blended families or real estate abroad, professional guidance can be worthwhile in order to pass on wealth in a structured manner and promote family peace as far as possible.

FAQ: Frequently asked questions about real estate in estate planning

Should I leave my house to my heirs through inheritance, or give it to them as a gift during my lifetime?

What happens to a property if there are several children?

What factors should be considered when transferring a house as an advance inheritance?

Can one child take over the property?

Yes. A property may be allocated to one child as part of an advance inheritance or in the course of the estate distribution. As a rule, the value of the property is credited against that child’s inheritance share and the other heirs are taken into account accordingly. If the estate is insufficient to settle the inheritance shares of the other heirs, the child concerned must pay out the other heirs.

How can the spouse remain in the house?

What happens to a holiday home abroad?

Is an executor necessary?

How can disputes among heirs be avoided?

Real estate in estate planning: Passing on, gifting, and avoiding conflicts over property