The case

The Swiss Supreme Court just published a ground-breaking judgment!

Source: David Wallace Wilson SWLegal and 5A_89/2024 decision of 16 Dezember 2024 II. zivilrechtliche Abteilung (German)

The commentary

After G’s death in 2013, an inventory of his estate was drawn up and his 6 heirs agreed on the estate division – in particular, his 3 grandchildren assigned their rights to his 3 children against compensation.

In 2017, 2 children applied for a voluntary disclosure – it emerged that G has been the settlor of a Liechtenstein trust; G has been its sole unrestricted beneficiary of capital and income during his lifetime; and after G’s death, only these 2 heirs had become trust beneficiaries. Thus, a supplementary inventory was drawn up, including the trust assets, and the grandchildren demanded a redistribution. Their claim was rejected at first, partially upheld on appeal, but ultimately dismissed.

For the Swiss Supreme Court, an irrevocable discretionary trust does NOT form part of the deceased’s estate. In particular, a trust’s tax treatment (e.g. as transparent) can well differ from its legal qualification under succession law. Irrevocable discretionary trusts do NOT necessarily violate Swiss inheritance laws. Specifically, distributions received by heirs/beneficiaries during the settlor’s lifetime are in principle subject to hotchpot (rapport / Ausgleichung); same for fixed interest trusts; but not for irrevocable discretionary trusts.