- · Switzerland's revised inheritance law, effective January 1, 2023, reduced descendants' compulsory portions from three-quarters to one-half of their statutory share and abolished parents' compulsory portions entirely.
- · The freely disposable portion of an estate has increased correspondingly, giving founders meaningful room to direct operational assets to a chosen successor.
- · Structured compensation mechanisms, including shareholder agreements and fair-value studies, remain essential for balancing non-active heirs' interests without impairing the business.
- · A second legislative package aimed at extending these gains failed in the Council of States in March 2024, making the 2023 reform the definitive legal baseline for succession planning today.
Switzerland does not typically announce structural change with fanfare. The federal revision of inheritance law that came into force on January 1, 2023, is a fitting example: no ribbon-cutting, no headline campaign, just a carefully deliberated adjustment to the Swiss Civil Code that has materially altered what a founder can do with the business they have spent decades building.
For SME owners, institutional buyers, family offices, and M&A advisors active in the Swiss market, the implications are worth examining with some care. The reform did not reinvent Swiss inheritance law. It refined it, in one targeted direction: making it easier to transfer an operating business to a single qualified successor without triggering a forced fragmentation of the asset.
Prior to 2023, Swiss law afforded descendants a compulsory portion equal to three-quarters of their statutory share of the estate. In practical terms, this meant that a founder wishing to leave the family business to one of three children, for instance, had very limited freedom to do so without creating substantial cash obligations toward the other two. The compulsory portion acted as a legal floor below which the testator's discretion simply could not reach.
As of January 1, 2023, that floor was lowered. Descendants now hold a compulsory portion equal to one-half of their statutory share, down from three-quarters. The reduction is not dramatic in isolation, but its effect on business succession planning is tangible. A founder directing the business to a single successor now has a meaningfully larger freely disposable portion of the estate to work with, whether through a well-drafted will or an inheritance contract.
The revision also abolished the compulsory portion for parents entirely. Parents remain statutory heirs in the absence of a will, but they are no longer entitled to a protected minimum share. This change primarily affects founders without surviving spouses or children, a narrower population, but it is nonetheless a structural clarification that removes an unpredictable variable from estate planning.
These changes apply across the relevant instruments of Swiss estate law: wills, inheritance contracts, and the statutory succession hierarchy codified in Articles 434 through 441 of the Swiss Civil Code, as noted in federal materials published under Federal Statistical Office reference No. 83570.
The reform was not introduced as an abstract exercise in legal modernisation. Federal materials accompanying the revision cite Unternehmensnachfolge, business succession, as a primary policy rationale. Swiss SMEs account for a substantial share of national employment and economic output, and the legal environment governing how they transfer between generations is therefore a matter of some economic consequence.
The pre-reform compulsory portion regime, designed for an era when estate assets were more typically liquid, did not translate cleanly to founder-led businesses where the primary asset is an illiquid operating company. When the estate's main holding is a mid-sized manufacturing firm in the canton of Aargau or a logistics operation near Basel, a rigid compulsory portion can mean that non-active heirs must be satisfied in cash, which the estate may not have. The result, not infrequently, was a forced sale or a partial liquidation, often at a discount to fair value and under time pressure.
The 2023 revision acknowledges this structural mismatch. By expanding the freely disposable portion, it gives founders the legal latitude to preference an active successor while addressing non-active heirs through other estate elements, structured buyout arrangements, or life insurance vehicles, without automatically impairing the business in the process.
The revision of Swiss inheritance law was explicitly designed to improve the conditions for business succession, giving testators greater freedom to direct an operating business to a qualified successor." Federal Office of Justice, Federal Statistical Office No. 83570
Intellectual honesty requires noting what the 2023 revision does not do. It does not eliminate the need for careful structuring. A founder who assumes that a reduced compulsory portion automatically solves the succession question is likely to be disappointed.
Non-active heirs still hold rights to their revised compulsory portions, and those rights are enforceable. The difference is one of degree, not of kind. Founders, their advisors, and any institutional counterparties involved in a succession-linked transaction still require shareholder agreements, financing arrangements for intra-family buyouts, and defensible fair-value studies to ensure that the transfer is legally sound and does not expose the successor to subsequent claims.
Tax considerations also remain independent of the inheritance law revision. Swiss cantonal inheritance taxes vary considerably, and the federal gift and inheritance tax landscape is a separate dimension entirely, one that estate planners must address alongside the civil law framework.
There is also a legislative footnote worth registering. A second package of reforms, intended to go further in easing business succession, was brought before the Council of States and was rejected in March 2024. The 2023 revision therefore stands as the current and, for the foreseeable future, final position of Swiss law on this question. Advisors building succession plans should calibrate expectations accordingly, rather than anticipating a further legislative tailwind that has, for now, stalled.
The reform is relevant not only to founders and their families but also to the institutional buyers and M&A advisors who engage with Swiss SMEs on the secondary market.
A business whose succession is legally constrained is a business that may surface on the market for the wrong reasons, under duress, at a compressed valuation, and with a compressed timeline. The expanded freely disposable portion reduces, at the margin, the number of transactions driven by inheritance fragmentation rather than by genuine strategic intent. That is a modest but real improvement in deal quality for professional acquirers.
Conversely, for founders who are weighing a family transition against an institutional sale, the revised legal architecture offers a more credible internal option than existed before 2023. An inheritance contract, properly drafted and coupled with appropriate financing arrangements, can now achieve outcomes that previously required either accepting a forced sale or engineering complex legal workarounds. That expands the set of realistic alternatives a founder can consider when engaging with any transaction process.
Family offices advising principals with Swiss operating assets should factor the revised compulsory portion calculations into their estate modelling as a baseline assumption. The numbers have changed, and plans drafted before January 2023 should be reviewed against the current framework.
The 2023 inheritance law revision is neither a minor technical adjustment nor a wholesale transformation of Swiss estate law. It is a calibrated liberalisation that addresses a documented structural problem in business succession, increases founder flexibility in a measured way, and leaves significant planning work to be done by advisors, legal counsel, and the parties themselves.
For the Swiss SME market, it is a meaningful development. For anyone operating at the intersection of family business, succession planning, and institutional M&A in Switzerland, understanding the revised framework is not optional. It is the legal ground on which decisions are now made.
Sources and further reading: UBS Switzerland, Inheritance Law for Entrepreneurs | Swiss Life, Inheritance Law in Switzerland | Findea, New Inheritance Law 2023 | Federal Office of Justice | PwC Switzerland, Succession Plan