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Estate Planning for U.S. Persons Living in Switzerland: 2 Key Considerations

March 28, 2024

Don’t leave your heirs with a bad surprise! Here are two key considerations for U.S. citizens residing in Switzerland.

If you are a U.S. person (i.e. citizen or Green Card holder) residing in Switzerland, you should understand that the transfer of assets to your desired heirs is treated differently from the manner done under U.S. inheritance rules. Some of these differences can catch your estate’s beneficiaries unpleasantly by surprise and significantly decrease their inheritance. There are two distinct differences. Let’s dive in.

Inheritance tax

The first issue is which Swiss and U.S. tax jurisdictions assess the inheritance tax: namely, the Federal and/or States (Cantons). In the U.S., inheritance taxes are assessed at the federal level, with a few states also applying their own estate tax rules.

However, in Switzerland the Federal Government currently does not have an estate tax. Rather, it is left to each Canton to determine its own inheritance tax rules. You can imagine that 26 different rules can cause significant problems and therefore require careful estate planning.

How are estate taxes calculated?

The second point of consideration is how estate taxes are calculated and who is held liable to pay the tax. The U.S. Federal Government first considers the size of the estate and will assess inheritance tax if the estate exceeds a certain amount ($12,920,000 for 2023 and $13,610,000 for 2024). It is the estate which is required to pay the tax prior to assets being distributed.

Swiss Cantons, by contrast, do not necessarily consider the size of the estate but look at who the beneficiaries are. Most Cantons will not assess any inheritance tax if the heirs are in direct line with the decedent, i.e. spouse, children, grandchildren, parents, and siblings. However, some Cantons do not have this direct line exception.

The final shock for an heir who receives an inheritance subject to the Canton’s estate tax is that she or he must pay the tax rather than the estate.

By being aware of these two differences between the U.S. and Swiss estate tax systems, you can start to make plans to mitigate against any unpleasant surprises for your heirs.

Questions? Feel free to contact a member of our International Tax Services Practice.

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