Many people wish to protect their surviving partner without forcing an immediate sale of real estate or an immediate division of the estate. A usufruct can be a suitable instrument for precisely this purpose.

A usufruct allows a person to use an asset and receive the income from it, even though they are not the owner. In Switzerland, usufruct is governed by Art. 745 et seq. of the Swiss Civil Code. In inheritance law, it can be granted over estate assets by means of a will or a contract of succession, for example over real estate, a securities portfolio or specific parts of the estate.

Usufruct is particularly practical in relation to real estate. The beneficiary may continue living in the apartment or house, or may rent out the property and retain the income. Ownership, however, remains with or passes to the heirs, for example the children.

To avoid disputes later, one point is particularly important: compulsory portions. If the usufruct restricts compulsory portions, a contractual arrangement by way of a contract of succession may be necessary.

What is a usufruct?

A usufruct separates use from ownership. The usufructuary may use the asset, live in it, rent it out or receive income from it. The owners, however, are other persons, often the heirs, for example the children.

The usufructuary cannot sell the asset, because they do not own it. At the same time, they must preserve the asset carefully and usually bear the ongoing costs, ordinary maintenance, charges and, in the case of real estate, often certain burdens as well. The precise allocation of costs should be clearly regulated in the testamentary disposition or contract of succession.

Usufruct is particularly interesting where the intention is to say:

“You should be able to live securely after my death or receive the income. But ownership should remain with my heirs in the long term.”

After the usufruct ends, usually upon the death of the usufructuary, the asset returns to the owners free of that burden. They may then use it themselves, sell it or divide it among themselves.

Legacy of usufruct

In inheritance law, a usufruct is often granted as a legacy. This may be described as a legacy of usufruct. This means that the heirs become the owners of the asset, while a specific person receives a right of use and income over it.

In practice, this may look as follows:

Example 1: The surviving partner receives a lifelong usufruct over the shared apartment. The children become the owners, but they can only freely dispose of the apartment once the usufruct has ended.

Example 2: The surviving partner receives a usufruct over a securities portfolio. They may receive the income from the portfolio, while the capital itself remains preserved for the heirs.

Why is usufruct particularly important for unmarried couples?

In Switzerland, an unmarried surviving partner has no statutory inheritance entitlement. Without a will or a contract of succession, a cohabiting partner inherits nothing.

This can be especially problematic if the deceased leaves behind children, parents or other statutory heirs. A shared home may then fall wholly or partly into the estate. Even if the surviving partner is a co-owner, the deceased person’s share may pass to the heirs. In the worst case, pressure may arise to sell the property or to pay out the heirs.

A usufruct can help provide for this situation. The surviving partner receives a protected right of use without necessarily having to receive ownership. However, a usufruct must not infringe the compulsory portions of protected heirs.

Compulsory portions: The limit of estate planning

In Switzerland, certain heirs cannot be completely excluded. In particular, descendants as well as spouses and registered partners are protected by compulsory portions. As a rule, their compulsory portion amounts to one half of their statutory inheritance entitlement. Parents no longer have a compulsory portion.

This is particularly important for unmarried couples. The cohabiting partner does not have a compulsory portion of their own. However, if the deceased leaves children, those children have compulsory portion rights.

Any benefit granted to the partner, whether by ownership, legacy or usufruct, must therefore fit within the freely disposable portion, unless the children consent or waive their rights.

How is a usufruct taken into account for the compulsory portion?

A usufruct is not simply taken into account at the full market value of the real estate or asset. What matters is its economic value.

In the case of a usufruct, the capitalised value or present value of the right of use and income is usually calculated. This depends in particular on:

• the value of the encumbered asset;
• the annual use or income, for example rental value or rental income;
• the expected duration of the usufruct;
• the age and life expectancy of the usufructuary;
• the capitalisation interest rate applied.

The younger the usufructuary is, and the longer the usufruct is expected to last, the higher the capital value of the usufruct will be.

For the calculation of compulsory portions, this means:

The beneficiary of the usufruct receives, in economic terms, the capitalised value of the usufruct. The heirs who receive ownership, by contrast, receive only encumbered ownership. This is worth less than unencumbered ownership, because they cannot freely use the asset during the term of the usufruct.

A usufruct can therefore infringe compulsory portions even if the compulsory portion heirs formally become the owners. What matters is not only who is registered as owner, but whether the compulsory portion heirs receive the value to which they are entitled.

The best solution: Contract of succession with the consent of the compulsory portion heirs

If it is foreseeable that a usufruct may interfere with compulsory portions, a simple will is often not sufficient to create planning certainty.

In such cases, a contract of succession is often the safer solution. The compulsory portion heirs can be involved in the arrangement. They can consent to the usufruct, declare a waiver of their compulsory portion or accept a specific solution in a binding manner.

This is particularly useful in cases involving:

• high-value real estate;
• unmarried couples;
• patchwork families;
• children from previous relationships;
• assets in several countries;
• situations where the surviving partner must be able to remain in the home.

A contract of succession creates greater certainty because the future heirs are not confronted with the burden only after the death. They know the arrangement and have agreed to it.

Special case: Spouse or registered partner under Art. 473 Swiss Civil Code

For spouses and registered partners, there is a special possibility of preferential treatment under Art. 473 of the Swiss Civil Code. However, this applies only in relation to common descendants.

In this constellation, the surviving spouse or registered partner can be protected particularly strongly. Under the current law, it is possible to allocate one half of the estate to the surviving spouse in ownership and, in addition, to grant them a usufruct over the share of the common descendants.

This is a classic instrument where there are common children and the surviving spouse is intended to remain in the family home or continue receiving income from the assets.

However, it is important to note that this special rule does not apply to unmarried couples. Nor does it automatically apply in patchwork situations involving children who are not common descendants. In such cases, individual planning is required, often by means of a contract of succession and with the consent of the affected compulsory portion heirs.

Usufruct or right of residence?

A usufruct goes further than a right of residence.

A right of residence usually only allows a person to live in an apartment or house themselves. A usufruct, by contrast, also allows the asset to be rented out and the income retained, unless otherwise provided.

For the protection of a partner, usufruct can therefore be stronger than a mere right of residence. At the same time, it is economically more valuable and may therefore be more likely to raise questions concerning compulsory portions.

Rights and obligations: Who bears which costs?

For a usufruct to work in daily life, it should be clearly regulated who bears which costs.

Typically, the usufructuary bears:

• ongoing ancillary costs;
• ordinary maintenance;
• minor repairs;
• public charges;
• mortgage interest, where agreed or provided by law.

The owners are more likely to bear extraordinary costs or value-enhancing investments. In practice, however, this should not be left open. Especially in relation to real estate, renovations, mortgages, taxes and insurance can later lead to disputes.

A good arrangement should therefore expressly state:

• Who pays for maintenance?
• Who bears the cost of major renovations?
• Who pays mortgage interest?
• May the property be rented out?
• Who decides on major structural measures?
• What happens if the usufructuary voluntarily moves out?

When is a usufruct particularly useful?

A usufruct is often suitable where:

• the surviving partner should be able to live in the property for life;
• real estate should not be sold immediately;
• rental income or income from assets should provide financial support;
• ownership should remain with the children or other heirs in the long term;
• an immediate division of the estate should be avoided;
• the partner should be protected without becoming the owner.

Especially for unmarried couples, usufruct can be a fair solution. The partner receives security, while the heirs remain the long-term owners.

Excursus: Does usufruct also exist in Thailand?

Yes. Thailand has a similar concept: usufruct, in Thai สิทธิเก็บกิน. It is governed by the Thai Civil and Commercial Code and grants rights of possession, use and income over real estate without transferring ownership.

A usufruct may also play a role in estate planning. For example, a person may provide in a will that ownership of a property passes to the children, while the surviving partner receives a lifelong right of use.

Conversely, a right of use may also be registered in favour of children from a previous marriage before death, for example to help secure an intended inheritance arrangement where land is already registered in the name of the Thai spouse.

In Thailand, it is particularly important that such rights are correctly registered with the competent Land Office so that they have effect against third parties. In addition, a usufruct is generally personal and not inheritable. It usually ends upon the death of the beneficiary.

For cross-border estate planning between Switzerland and Thailand, it should therefore be carefully examined which assets are located in which country and which disposition will actually be recognised and implemented there.

Conclusion

Usufruct is a powerful instrument in estate planning. It makes it possible to provide economic protection for the surviving partner without finally transferring ownership.

Especially for unmarried couples, it can prevent the surviving partner from suddenly having to move out of the shared home after the other partner’s death or from having to dispute a sale with the heirs.

The decisive point, however, is the compulsory portion. A usufruct is valued economically and taken into account at its capitalised value. If it exceeds the freely disposable portion or if compulsory portion heirs receive less than their compulsory portion in value, it may be challenged or reduced.

Anyone seeking planning certainty should therefore not only draw up a will, but should have the compulsory portion issue reviewed in advance. In cases involving real estate or complex family situations, a contract of succession with the consent of the compulsory portion heirs is often the legally more stable solution.

This is how a good idea becomes estate planning that also works when it truly matters.

Note: This article does not replace individual legal advice. Especially in cases involving real estate, compulsory portions, patchwork families or assets in several countries, the specific situation should be legally reviewed.