Advance inheritance — what you should know about the compensation obligation
What does early inheritance mean? - The definition
The Inheritance means a donation in which the testator transfers part of the inheritance to an heir during his lifetime, whether in the form of money, real estate, jewelry or the cancellation of debts. An advance inheritance payment is called Advance on future inheritance considered and is therefore associated with a Compensation obligation connected to the other heirs. This form of early inheritance settlement is treated as a gift for tax purposes and may therefore be subject to gift tax.
What should you consider when withdrawing an inheritance?
Since an advance payment is considered an advance on the inheritance, the beneficiary must pay off the assets received in the event of inheritance in order to obtain a equal treatment of all heirs ensure (Art. 626 ZGB). This provision applies without restriction to legal heirs, while contributions to persons outside the legal succession are regarded as mere gifts. In principle, however, the decision to grant inheritance benefits lies with the testator and there is no right to early capital transfers.
It is important that only donations made within the last five years before the inheritance and violate the compulsory shares of legal heirs must be settled. However, the testator can explicitly waive the compensation obligation in the will, which leaves the compulsory shares of legal heirs (descendants, spouses and registered partners) unaffected.
Can the compensation obligation be avoided?
A testator can a Waiver of the obligation to pay compensation Determine in the will which the early share will not be taken into account in the subsequent inheritance. However, the compulsory shares of legal heirs remain unaffected. If the remaining inheritance after the death of the testator is not sufficient to cover the compulsory shares, the legal heirs can claim their share from the beneficiary.
tip: An alternative to early inheritance payment can be a Loans from the testator be that offers tax benefits. Since the loan remains in the testator's assets, the beneficiary's compensation obligation is waived. In addition, the borrower can deduct debt interest from his taxable income.
What are the advantages and disadvantages of an early inheritance payment?
An advance inheritance offers a number of advantages, but also entails risks. For testators, the grant can be an opportunity to reduce the tax burden, as the early transfer of wealth reduces. Advance inheritance often helps children or grandchildren finance their own home or relieve debt while the testator is still alive. However, testators should ensure that they do not restrict themselves financially as a result of this grant and continue to meet all claims for government benefits.
An advance inheritance payment is beneficial for beneficiaries, as they can reduce their tax burden in the event of an inheritance. The disadvantage, however, lies in the obligation to pay compensation in the event of an inheritance. In particular in the case of an advance inheritance in the form of real estate, beneficiaries should carefully examine the possible financial obligations since in the event of inheritance, the increase in the value of the property must also be taken into account.
Disadvantages for real estate heirs
In the case of an advance inheritance in the form of real estate, the beneficiary must offset the received property against its current market value in the event of inheritance. It is not the value at the time of transfer that is decisive, but that at the time of division of the inheritance. If there is a significant increase in value, the beneficiary is obliged to offset this increase with the other heirs (Art. 617 ZGB). If the compensation value exceeds the beneficiary's share of inheritance, he must pay the difference to the remaining heirs.
important: If the beneficiary dies before the inheritance, the compensation obligation is transferred to his heirs, even if they do not directly benefit from the original advance inheritance payment!