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Wach Forced Heirship and the Common Law Trust

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Wach Forced Heirship and the Common Law Trust Forced Heirship and the Common Law Trust - Especially from the Swiss Point of View - Part I - ny Common Law jurist will naturally beneficiaries are resident or domiciled in a civil harbour a certain reserve against an law country with a trust or trust property is Aintrinsically civil law institution such as situated in a civil law country are concerned. I forced heirship. Reciprocally a similar attitude will revert to this in detail later. may often be found when civil lawyers are 1.1 The Swiss Civil Code confronted with the concept of the trust. It is necessary to examine forced heirship rules, There is a certain incompatibility between the two the ancillary provisions and the remedies in case Downloaded from https://academic.oup.com/tandt/article/2/5/16/1629111 by University of Zurich user on 12 March 2021 which does not spring just from an unwillingness of their violation under the Swiss Civil Code. to understand and come to terms with a different These concern the provisions that may prove an system. The cause lies deeper. It has its roots in obstacle to a property settlement under a trust. two fundamental differences in attitude and the These provisions under Swiss law may, to a large legal principles resulting therefrom. This extent, be considered to be characteristic for a difference which Mr. Duckworth calls the global civil law country inasmuch as, in effect, they do conflict of principles, is freedom of disposition of not vary fundamentally from those of say France, “ ... in all civil law a person over his estate, both during life time and Italy or Germany. upon death, on the one side (the Common Law systems ... the bulk In order to get a proper assessment of the situation Concept) as against preservation of the family of an individual’s we must, however, begin with the section in the property or the “patrimoine” on the other (the Federal Code on marital property law before we property passes on Civil Law Concept). move on to succession. This is often not realised death to his The Common Law system imposes a duty of care by Common lawyers when confronted with civil descendants.” on parents to provide for their children until such law issues of inheritance. time as they are able to provide for themselves. Over and above that, the child has no further by Dr Thomas Wach MA (Oxon) TEP claims on his or her parents’ former partner of STG-Coopers & property and all remoter issue are Lybrand, Zurich, Switzerland equally excluded in this respect. (I am not dealing here with At the beginning of a series of articles that appeared in succession on intestacy, which the periodical “Private Client Business” entitled: “An has no direct bearing on the Offshore View of Forced Heirship” the author, Mr Antony question). Duckworth, placed the headnote: The general rule in all civil law ‘Forced heirship poses a threat to all trusts, onshore as systems is that the bulk of an well as offshore, not just to those designed to individual’s property passes on circumvent forced heirship.’ death to his descendants. We have This article, based upon a talk given on 17th January this what is called universal “ ... the provisions succession ie immediate and year at a meeting of STEP German, Swiss and unconditional passing of property Liechtenstein branch in Zurich examines the position ... may prove an to the descendants in shares per especially from the Swiss point of view. obstacle to a stirpes. Where there are no property settlement descendants, the parents and, if they have predeceased, the remoter ascendants ie 1.1.2 Marital Property under a trust.” the grandparents take, following the male line of Upon marriage the law imposes a property regime ascendancy and descendancy of the deceased. which is community of property, unless the future The civil law system therefore, which stops short spouses enter into an express marriage contract in of saying that the property belongs to the family which they can stipulate, for instance, separation rather than the individual, reflects a sort of of property. Community of property gives each compromise between family ownership on the spouse an equal interest in the property acquired one hand and individual ownership on the other. by either of them during marriage. Upon the death Having established that, it follows logically, and of one spouse (or upon divorce), the community is therefore not surprisingly, that the concept of first dissolved. The marital property is then forced heirship is not confined to regulating the divided between the surviving spouse and the passing of property upon death but is estate of the deceased spouse. The heirs of the supplemented by a number of ancillary deceased spouse only participate in the net estate restrictions as regards an individual’s freedom of after the share of the surviving spouse in the disposition over his property during his lifetime. community has been accounted for. It is these restrictions, just as much as the rules of Dispositions made during marriage, possibly in descendancy, that may constitute a threat to a the form of a trust settlement, favouring a trust. They should be observed particularly where beneficiary other than the spouse, may therefore Page 16 TRUSTS & TRUSTEES come under attack from the matrimonial property only take if the deceased leaves no children. angle. Expressed in figures, we will get the following I.1.3Rules of Inheritance and Freedom of result: Disposition B: The rules of inheritance are contained in arts 470 300.000 out of the dissolution of the maritial property - 480 of the Federal Civil Code. This section 131.250 3/8 as reserved quota defines the disposable quota as against the quota 431.250 Total for B reserved for the forced heirs or the compulsory portion (reserve). A person leaving descendants, C and D parents or a spouse is bound by the rules of forced heirship and can only dispose freely after 175.000 or 87.500 each as reserved quota allowing for the reserved quota. 43.750 1/8 free disposable quota 650.000 total The reserved quotas are: Assuming Adies leaving no children but his 3/4 for a descendant Downloaded from https://academic.oup.com/tandt/article/2/5/16/1629111 by University of Zurich user on 12 March 2021 “Dispositions made parent G, we get the following situation: 1/2 for each parent during marriage ... 1/2 for the surviving spouse (a) Division of marital property as in the previous example. may therefore come The above quotas have to be read in relation to the under attack ...” actual inheritance shares ie what would devolve (b) Reserved portions by forced heirship rules: on the legal heirs in case of intestacy. B: 3/8 We therefore get the following reserves as against G: 1/8 the disposable quotas, Expressed in figures, we will get the following depending on the class of legal heirs that result: participate. B: Only descendants: 3/4 1/4 300.000 out of the dissolution of the marital property Only parents: 1/2 1/2 131.250 3/8 as reserved quota Only brothers and sisters: 1/4 3/4 431.250 Total for B (For further quotas depending on the number of G: heirs and the proximity of relationships see Annex I) 43.750 1/8 reserved quota 175.000 1/2 free disposable quota Example 650.000 Total A short example may illustrate the modus operandi: ANNEX I Adies leaving a spouse B, two children Cand D and a parent G. • Compulsory quota • Disposable quota Ahas brought 150.000 into his marriage, B “The surviving 100.000. During their marriage they have - Descendants only 3/4 1/4 spouse, when increased their marital property by a further - Parents only 1/2 1/2 400.000, so that at the time of A’s death it - Parents & brothers competing with amounts to 650.000. and/or sisters 1/4 3/4 descendants, can be - Brothers & sisters Their matrimonial property regime was the usual only 0 1 given his or her Community of Property. - Grandparents only0 1 share in ownership - Descendants & (a) The first stage after A’s death is the spouse 1/4 + 3/8 3/8 or in usufruct.” dissolution of marital property. The property - Parents & spouse 3/8 + 1/8 1/2 shares originally brought in are re-allocated. - Parents & brothers/ Consequently 100.000 will go to Bas surviving sisters & spouse 3/8+1/16+0 9/16 spouse and 150.000 into A’s estate. For the sake - Brothers/sisters & of simplicity, let us assume that the 400.000 were spouse 3/8 + 0 5/8 acquired during marriage through joint efforts by - Grandparents & the two spouses. This so-called surplus or profit is spouse 1/2 + 0 1/2 in the second stage divided equally. Bwill therefore get an additional 200.000 and the other The surviving spouse, when competing with 200.000 will go into A’s estate. This will leave descendants, can be given his or her share in 350.000 for distribution by inheritance. ownership or in usufruct. Whether the surviving spouse gets one or the other is irrelevant for the (b) The reserved quotas by forced heirships calculation of the reserved portion and the rules will then be as follows: corresponding disposable quota which is always made on the assumption of allocation of 3/4 of 1/2 = (3/8) to the surviving spouse B ownership. Unlike France, where the surviving 1/2 = (4/8) of the whole to the two children spouse has no forced heirship right and the Cand D reserved quota varies according to the number of descendants, under Swiss Civil Law, it is always Disposable free quote: 1/8 3/4, regardless of the fact whether there is only Ghas no duty share because the parental line will one or whether there are five or ten children.
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