The consequences of a family death are always distressing, however for those living and working in a foreign country, such an event can be stressful and challenging in the extreme. 

Inheritance laws differ from country to country, especially within Europe, and without careful and prior planning, expatriates who have pensions, property and assets in more than one country may inadvertently pay tax twice, or get trapped in probate in multiple tax jurisdictions. 

One example is the issue of testamentary freedom, or the ability to pass your entire estate to whoever you wish, including your spouse. Many European countries do not allow full testamentary freedom, however recent changes in legislation offer much greater flexibility for foreign nationals on the choice of tax law that would apply on death.

So whilst estate planning is sometimes thought of as only being relevant for the very wealthy, in practice it is relevant for anyone who has a family and /or is concerned about what would happen in the event of their death. Proper estate planning involves ensuring that your assets are held tax efficiently and will be distributed in line with your wishes, and planning should take place throughout life and not just on death.

Typical measures may include:

  • Writing a will
  • Appointing executors of your estate, and guardians for younger children
  • Establishing a life insurance contract
  • Creating a trust

What is clear is that the consequences of inaction can be significant, and often expensive and it is therefore essential to ensure proper planning is in place. For an accurate assessment of your own situation in this regard, contact us.

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One aspect of estate planning which is often overlooked is what would happen in the event of suffering a long-term illness or disability and permanently impaired mental or physical capacity whilst resident in Switzerland. Swiss law is very specific in this regard, and it is covered by Article 360 of the Swiss Civil Code and is called the Advance Care Directive.

By executing what is known as an Advance Care Directive, a person resident in Switzerland can make specific provision for their future in the event that they are no longer capable of judgement, for example as a result of an accident, illness or old age. The provision states that:

  • A person with capacity to act may instruct a natural person or legal entity to take responsibility for their personal care or the management of their assets or to act as their legal agent in the event that they are no longer capable of judgement
  • They must define the tasks that are to be assigned and may issue instructions on how these tasks are to be fulfilled
  • They may provide for a replacement for the event that the appointee is not suitable for the tasks, does not accept the mandate or terminates the mandate

Why is it useful to have an Advance (Health) Care Directive?

  • You retain the ability to make self-determined choices on what medical treatment you do or do not receive. This could include decisions on whether you want life support, for example
  • You protect your family from having to make difficult decisions on your behalf
  • You ensure that your financial affairs can be managed in line with your wishes

In essence, Swiss law allows a person with the capacity to act to determine how and by whom they would like to be cared for in the event of a loss of decision-making capacity.

Practical examples of such decisions could include the following:

  • Personal care: All personal aspects of daily life, such as support and representation in everyday matters, health care (medical examinations), the hiring of care staff, hospital stays or even admission to a home
  • Asset management: All aspects relating to assets, including checking and payment of invoices, tax matters, management of bank assets and real estate, disposal of bank assets, increasing or reducing mortgages or the purchase and sale of properties
  • Representation in legal matters: Including all legal acts

Who can execute an Advance Care Directive?
Any person who has the capacity to act can execute an Advance Care Directive. A person is considered to have capacity to act if, at the time of executing the advance care directive, they are of age and capable of judgment.

Who should consider executing an Advance Care Directive?
Executing an advance care directive could be suitable for anyone who wishes to independently decide who will represent them in the event that they are no longer capable of judgment, without having to resort to a review by the adult protection authority.

What happens if no Advance Care Directive is in place?
By law, spouses and registered partners have the right to represent their spouse or registered partner in the event that they are no longer capable of judgment. They may carry out all legal acts on behalf of their spouse or registered partner that are required to meet the need for support. They may also manage income and assets within the limits of everyday housekeeping.

However, for any ‘extraordinary’ asset management measures, such as selling real estate, taking out a loan, increasing, extending or amortizing a mortgage, or even changing an investment strategy, the spouse or the registered partner must obtain the consent of the adult protection authority. This legal right to act as representative applies only if the spouse / partner shares the same household and provide each other with regular and personal support. In addition, the spouse / partner must be capable of judgment to act as representative of the other. As proof of representation, spouses / partners can ask the adult protection authority to issue a certificate confirming their rights of representation. By executing an Advance Care Directive, couples can grant each other a general right of representation beyond that stipulated by law which also covers this ‘extraordinary’ asset management. Under Swiss law if a single person (e.g., single, divorced, widowed or unmarried) or cohabiting partner loses the capacity of judgment, by law nobody has the right to represent them in daily life. In such cases, the adult protection authority must establish a deputyship if no Advance Care Directive has been executed.

How do you execute an Advance Care Directive?
There are two ways of executing an advance care directive:

  • In holographic form: A holograph advance care directive must be handwritten, dated and signed by the client from beginning to end
  • Publicly authenticated: In this case, the advance care directive is executed with the assistance of a public official who has the relevant authority in the canton in question

Various organisations provide templates for an Advance Care Directive. For example, the Swiss Medical Association (FMH) has both a short version and a detailed version available for download.

Can an Advance Care Directive be changed, supplemented or revoked?
Yes, an Advance Care Directive can be amended or supplemented at any time before a person loses their capacity of judgment. It is important to note that this must be done before the advance care directive is declared to be valid by the adult protection authority. Amendments and changes need not be made in the same form as the Advance Care Directive was initially executed: they can either be handwritten, dated and signed or publicly authenticated. The individual may revoke their advance care directive, for example by destroying it or executing a new Advance Care Directive, provided they are still capable of judgment and the adult protection authority has not yet declared the original advance care directive to be valid. If the person concerned revokes their advance care directive in writing, they must do so in either of the ways provided for its execution. However, the revocation need not take the same form as the Advance Care Directive was initially executed in.

Where must the Advance Care Directive be kept?
The client may decide where their Advance Care Directive should be kept: If it is kept at the person’s home or with a trusted person, care must be taken to ensure that it is easy to locate in the event that the individual loses their capacity of judgment. It must be kept in a location that is easily accessible; a safe deposit box at a bank, for example, is not a suitable location. In some cantons, the Advance Care Directive may also be lodged with the adult protection authority. In addition, every canton offers the option of recording the place where it is kept in the civil register of the Civil Register Office in the person’s place of residence. This ensures that the adult protection authority is informed of the existence of an Advance Care Directive in the event of the person losing their capacity of judgment. After all, an Advance Care Directive that nobody knows exists is of no help when the individual concerned is in need of assistance.

You can also request that the existence and the location of your Advanced Care Directive is entered on your health insurance card. This ensures that in the event of treatment of a person who has lost the capacity of judgement, the medical establishment will be aware that a directive is in place.

When does the Advance Care Directive take effect?
Where the adult protection authority learns that a person is no longer capable of judgment, it verifies that there is a valid and effective Advance Care Directive, that the designated person is fit for the duties assigned to them and they are prepared to accept the mandate. If the person’s loss of capacity of judgment is also confirmed, the adult protection authority puts the Advance Care Directive into effect. The appointee is then issued with a formal document (a ‘decision on effectiveness’) stating their powers, which serves as due authorization in dealings with third parties. The appointee cannot assume their duties without this ‘decision on effectiveness’.

When does the Advance Care Directive cease to apply?
If the individual concerned regains capacity of judgment or the appointee loses their capacity of judgment, the Advance Care Directive ceases to have effect.

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An Assurance Vie is a type of insurance investment policy exclusive for residents in France