Lifetime gifts and advancements on inheritance

Why transfer wealth during your lifetime?

When people think about succession planning, they often focus on what happens after death.

In practice, however, many parents and grandparents prefer to transfer part of their wealth earlier, when it can support a meaningful life project.

This may include:

• purchasing a first home;

• financing education;

• helping to start or acquire a business;

• supporting a family project;

• assisting the next generation at an important moment in life.

In some situations, a contribution made at age 30 or 40 may have a greater impact than the same amount received decades later.

Lifetime transfers may also help younger generations become involved in managing family wealth gradually rather than all at once.

At the same time, it is important to ensure that your own financial security remains intact, particularly in retirement.​‌

Why does the distinction matter?

Because the consequences at the time of succession may be very different.

A parent may wish to:

• support a child while preserving equality between heirs;
• favour one child within the limits permitted by law;
• provide for an unmarried partner;
• support someone outside the family.

The way the transfer is characterised can influence how it will be treated in the future.

How are lifetime gifts taken into account when an estate is settled?

One of the key concepts in this area is inheritance equalisation.

The purpose of inheritance equalisation is to preserve fairness between heirs when certain benefits have already been received during the lifetime of the deceased.

The principle of inheritance equalisation

When an estate is settled, certain lifetime transfers may be brought back into account for calculation purposes.

This does not usually mean that previously transferred assets must physically be returned.

Rather, the objective is to restore balance between heirs when the estate is divided.

Example

Estate remaining at death: CHF 800,000

Two children.

One child has already received CHF 200,000 as an advancement on inheritance.

The reference estate becomes CHF 1 million.

Each child would notionally be entitled to CHF 500,000.

The child who already received CHF 200,000 would therefore receive a reduced share, helping preserve fairness between the heirs.

What happens when property is transferred during your lifetime?

Transfers involving property require particular attention.

A house, apartment or piece of land may increase substantially in value over time.

Imagine that a property is transferred to one child as an advancement on inheritance. Twenty years later, the property is worth significantly more than when it was transferred.

The question then becomes: which value should be taken into account when the estate is eventually settled?

In certain circumstances, changes in the value of the property will need to be taken into account when dividing the estate, which can have a significant financial impact on the balance between the heirs.

For this reason, property gifts and property succession planning generally deserve careful consideration as part of a broader wealth transfer strategy.​‌

Can you favour one child over another?

Yes, within certain limits.

The 2023 reform of Swiss inheritance law increased testamentary freedom by expanding the freely disposable portion of an estate.

This means that it may be possible, in some situations, to favour one child or another beneficiary.

However, compulsory portions continue to protect certain heirs.

The issue is not always strict equality. Many families are instead looking for a fair solution that reflects individual circumstances.

Examples might include:

• a child taking over the family business;

• a child who has already benefited from substantial support;

• a child with specific needs.

These situations often require careful planning.

Gift or family loan: which solution is most appropriate?

When a child needs significant financial support, there is sometimes another option worth considering: a family loan.

Unlike a gift:

• the recipient is generally expected to repay the funds;

• the parents retain a claim;

• greater flexibility is preserved.

A family loan can be particularly useful when a child wishes to purchase property or finance a project without permanently altering the future balance of the estate.

In certain circumstances, it may also help protect the financial interests of the parents if their own needs change later in life.

What if the parents need that money later on?

This is probably one of the most common mistakes.

Out of generosity, some parents pass on a significant portion of their estate without having fully assessed their future needs.

Yet no one can know for certain:

• how long they will live;

• how their expenses might change;

• their future medical needs;

• or the potential cost of care.

An early transfer of assets must therefore always be preceded by a comprehensive review of their financial planning and retirement provisions.

Before helping their children, parents must first ensure that they themselves have sufficient resources to maintain their own quality of life.