Charitable foundations often receive gratuitous donations such as gifts and legacies, which sometimes represent a very important part of the foundation’s resources. What the charitable foundations have to keep in mind, however, are the so-called compulsory portions in the case of inheritance: If a person leaves certain categories of heirs at his or her death – the so-called heirs entitled to a compulsory share – they are entitled to a minimum share of the estate. Only the part that is freely available (“freely available quota”) can a testator bequeath to a foundation without any problems. If, on the other hand, he or she gives too much to a foundation and thereby violates the compulsory portion of heirs, these gifts to the foundation are contestable under Swiss inheritance law. The heir whose compulsory share has been violated can claim his or her minimum share by means of a so-called action in abatement, and the foundation may have to return a donation it has received. The purpose of the action in abatement is to restore the violated compulsory portion at the expense of the recipients of lifetime or testamentary gifts. The establishment of a new foundation may also be contestable if the respective testator uses too many funds for this purpose and thus violates the compulsory portions of others.
New rules for compulsory shares
Since 1 January 2023, new rules apply to these compulsory portions. With the new regulations, the portion that testators can freely dispose of has been increased. This means that testators have more funds at their disposal with which they can benefit foundations by means of a will, set up new foundations or, of course, make donations to other persons who are close to their hearts. Under the previous law, the descendants, spouses or registered partners – and under certain circumstances also the parents – received compulsory portions of an inheritance. These compulsory shares amounted to 50 to 75 percent of the legal share of the inheritance. Since 1 January 2023, however, the compulsory portions are now in any case only 50 percent, and the parents’ compulsory portion has been abolished altogether. The testator’s freedom has thus been considerably increased.
Thus, since 1 January 2023, a testator can always freely dispose of half of the estate as a minimum – instead of as a maximum – if there are heirs with compulsory portions. If there are no children, but surviving parents and spouses, the testator can even bequeath more than half – namely 5/8 – of the estate freely. If neither spouses nor descendants survive, the testator is completely free to allocate his or her estate assets. All these changes apply to every inheritance case since 1 January 2023.
Designate donations as precisely as possible
If a person dies after 1 January 2023 but had already drafted his or her will before 1 January 2023 and named a foundation as the beneficiary therein, the will may not be entirely comprehensible. This is because it could be unclear how much the donation should actually be: Does the testator namely refer to the “freely available quota” before or after the change in the law took place? Depending on the result of the interpretation, the foundation may receive a significantly larger share of the estate.
Accordingly, it is always advisable for testators to designate the respective donations in their wills as precisely as possible. Moreover, in discussions with testators, executors or, in extreme cases, as defendants in invalidity or abatement proceedings, foundation boards and employees of foundations should be careful that these wills are interpreted in favour of the foundation, for example if the will mentions the “biggest possible benefit” for the foundation or, in the case of a bequest, the amount of “the freely available quota” is questionable. In case of doubt, a foundation receiving donations should seek legal advice and thus avoid complications.