In our previous article, we discussed how third-party funding (TPF) could be used in disputes involving individuals rather than businesses. The focus of that article was on divorce proceedings – particularly for divorcing spouses with limited access to cash yet considerable assets owned jointly with their soon-to-be ex-spouse. In such cases, TPF can help level the playing field.
In this fourth article in the series, we take a look at another niche market opportunity in TPF: inheritance disputes.
(If you haven’t already done so, be sure to read the first two articles of this blog series, where you'll get an overview of third-party litigation funding and see how third-party funding can be used in arbitration cases.)
Inheritance in Switzerland
Intestate
When someone subject to Swiss inheritance law passes away, the way their estate is handled depends on whether they left a will. If they didn’t – meaning they’re intestate – their estate will be divided among their legal heirs in keeping with a strict hierarchy of entitlement as well as pre-defined percentages.
Legal heirs consist of the decedent’s spouse or registered partner and the decedent’s close relatives. Cohabiting partners and divorced partners are excluded.
If the decedent didn’t leave behind a spouse or registered partner, their close relatives receive the entire estate. Conversely, if the decedent had no close relatives, their entire estate goes to the decedent’s spouse or registered partner.
Highest in the hierarchy of close relatives are the decedent’s descendants, i.e., children, grandchildren and so on. If the decedent’s children are minors, the surviving parent will manage their inheritance.
If there are both a spouse or registered partner and descendants, the estate is divided equally between them: the spouse or registered partner gets 50%, and the descendants get 50%. If there’s a spouse or registered partner but no descendants, the estate is divided between the spouse or registered partner (75%) and the other living relatives (25%), in this order: the decedent’s parents, siblings, nieces and nephews, grandparents, and cousins.
Relatives at one level of the hierarchy are only entitled to a share of the inheritance if there are no relatives above them in the hierarchy.
If there are no legal heirs at all, the decedent’s estate is awarded to either the canton or commune where the decedent lived most recently.
Testate
The story is a little different for decedents who are testate, meaning they’ve left a will. Under Swiss law, when you set out your wishes in a will, you have some influence over how your estate will be divided up – you can do what you want with the “disposable portion” of your estate. For example, you can bequeath a larger share of your estate to some legal heirs, such as your spouse or registered partner, leaving less for your descendants. And you can leave part of your estate to someone other than a legal heir. But you cannot cut your spouse or registered partner, or your descendants, out of your will completely. As legal heirs, they still enjoy a statutory entitlement (equal to half of their legal share of your estate if there were no will). That said, the disposable portion of estates has increased in size under Switzerland’s new inheritance law, which took effect on 1 January 2023.
Third-party funding
Inheritance disputes are relatively common in Switzerland. They may arise in relation to the validity of a will or of an inheritance agreement entered into between the testator and one or more heirs before the testator’s death. Heirs may also contest the amount of their inheritance if they feel they haven’t received the compulsory portion they’re entitled to. That can happen, for example, if the decedent gifted a significant proportion of their estate before dying, or if the decedent had a sizeable life insurance policy whose beneficiary is not a legal heir. Disputes can even arise surrounding the applicable law, where the decedent was not a Swiss national.
Inheritance-related disputes can be quite complex, and people who are entitled to a portion of an inheritance can be left empty-handed if they lack the means to assert their rights. If you’d like to know more about third-party funding, drop us a line at Swiss Legal Finance: info@swisslegalfinance.ch or 022 512 37 37. And be sure to check out our website: www.swisslegalfinance.ch.
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