Totting up: matrimonial property in Switzerland

When married people move to Switzerland, they very often take advice from tax and immigration law specialists. However, they often fail to consider the impact that their change of residence might have on other aspects of their wealth planning, such as their matrimonial property relations.

End game

Most people tend to think that the ?rules relating to their matrimonial property relations might only be applicable in case of a divorce and are thus highly reluctant to talk of such matters between themselves.

Even if such behaviour can be understandable, despite the fact that a marriage nowadays often ends up in a divorce, it neglects the fact that – divorce or no divorce – every marriage comes to an end, and the need to liquidate the matrimonial property relations between the spouses will sooner or later materialise.

When moving to Switzerland, a foreign couple should be aware that new rules are likely to apply automatically to their matrimonial property relations. Such rules might not only trigger important consequences in the event of a divorce, but might also be of crucial importance within a more general perspective of wealth planning and structuring, be it on the tax law level, on the inheritance law level, or in other areas of law.

There are several important points ?in relation to matrimonial property relations that need to be taken into account by couples intending to settle ?in Switzerland.

1. Jurisdiction of Swiss courts in matrimonial property matters

According to article 51 of the Swiss Private International Law Act (SPILA), the jurisdiction of Swiss authorities to deal with matrimonial property matters will be given when they already have jurisdiction either: to deal with the estate of one of the spouses after his/her death; to deal with the divorce of the spouses; or, to deal with the accessory effects of the marriage.

In cases of divorce, Swiss authorities have jurisdiction when either the defending spouse is domiciled (in the Swiss meaning, which is similar to the notion of permanent residence rather than to the English law notion of domicile) in Switzerland (article 59(a) SPILA), the applicant spouse is domiciled in Switzerland for more than one year, or is a Swiss national resident in Switzerland (article 59(b) SPILA).

Article 60 of SPILA further foresees a possible jurisdiction of Swiss authorities for Swiss nationals, when divorce abroad is impossible or very difficult.

Within the framework of inheritance law, the jurisdiction of Swiss courts shall primarily be admitted as per article 86 of SPILA when the deceased had his/her last domicile (within the meaning of Swiss law) in Switzerland (except as regards real estate located in countries claiming exclusive jurisdiction over ?such assets).

Article 87(1) of SPILA foresees that Swiss authorities will deal with the assets of a Swiss national, to the extent that no foreign authority deals with them; article 87(2) of SPILA further enables Swiss nationals to elect that Swiss courts shall deal with his/her estate.

Finally, article 88 of SPILA contains a default jurisdiction clause in relation to assets located in Switzerland, when no foreign authority deals with them.

As regards the general effects of marriage, jurisdiction of Swiss authorities shall be given as soon as one of the spouses is habitually resident in Switzerland (article 46 SPILA); article 47 further foresees a possibility for Swiss nationals to act before the authorities of their place of origin, if no action can be undertaken abroad.

In summary, as soon as a couple settles in Switzerland, Swiss authorities are likely to have jurisdiction to deal with claims relating to their matrimonial property relations.

2. Law applicable to the matrimonial property relations

Even though most couples do not specifically choose the law to be applied to their matrimonial property relations, article 52 of SPILA recognises the spouses’ choice as the primary connecting factor.

It thus foresees that the matrimonial property relations shall be governed by the law chosen by the spouses; such choice can be operated among the law of the spouses’ domicile at the time of the choice or after the wedding or any national law of one of the spouses.

According to article 53 of SPILA, such choice of law shall be made in writing or shall derive in a clear manner from the provisions of a matrimonial agreement (pre- or post-nuptial); it can be made at any time (if made after the wedding it will have retroactive effect to the date of the wedding, unless the spouses agree otherwise).

In the event that the spouses did not make a proper choice of law, their matrimonial property relations will be governed by the law of the country in which they are both domiciled (article 54(1)(a) SPILA) or, failing a current domicile of both spouses in the same country, by the law of the last country in which they were both domiciled at the same time (article 54(1)(b) SPILA).

In the event that the spouses were never domiciled simultaneously in the same country, their common national law shall apply (article 54(2) SPILA) and, failing such, the Swiss matrimonial system of segregation of assets shall apply (article 54(3) SPILA).

In case of change of the spouses’ domicile between countries during the marriage, article 55(1) of SPILA provides that the law of their new domicile shall apply to their matrimonial property relations and this with retroactive effect as from the beginning of their marriage. The spouses can exclude by written agreement such retroactivity.

According to article 55(2) of SPILA, the change of domicile shall have no effect on the law applicable to the matrimonial property relations when the spouses exclude its operation in writing so as to maintain the former applicable law or when they are bound by a matrimonial agreement.

Further, if the spouses have previously reached an agreement as to the choice of law (be it within the framework of a matrimonial agreement or of a simple written document), such choice of law shall remain valid even if the spouses change their domicile (article 53(3) SPILA).

3. Consequences on a couple settling in Switzerland

As a result of the above, a couple moving to Switzerland will potentially face a change in the law to be applied to their matrimonial property relations.

An existing couple without a matrimonial property agreement in place should be made aware that their matrimonial property relations will thereafter (from the date of marriage) probably be governed by Swiss law unless action is taken.

Most frequently, this results in the ordinary Swiss property regime applying, where each spouse (or his/her estate) will be entitled to a monetary claim against the other, amounting to half the net value of the assets acquired for consideration during the marriage (in particular earnings from work and business assets, but not including assets owned prior to marriage or received through gift or inheritance thereafter).

On the other hand, a couple, having entered into a matrimonial agreement, shall in principle incur less change in the event of a change of residence. In the event that the matrimonial agreement contains an explicit choice of law clause, the situation should be quite straightforward, as such choice will ordinarily be fully taken into account.

Should the agreement not contain a specific provision relating to the choice of law to be applied to the matrimonial property relations, such choice could, in certain cases, be inferred from the circumstances, in particular, when the agreement uses specific institutions from one of the laws that could be chosen by the spouses.

If such an inference is not possible, Swiss authorities shall generally apply the law of the country where the spouses were domiciled simultaneously at the time the agreement was executed (article 54(1)(a) cum 55(2) SPILA).

Assuming they are aware that the applicable law may have changed, a move to Switzerland might have a significant impact on each spouse’s expectations in relation to the matrimonial assets. Particularly, couples moving from jurisdictions where it is no longer the norm to enter into marriage agreements (often common law source jurisdictions), to Switzerland should be aware of the possible impact of such a change, notably the potential effects it may have on other aspects of wealth planning, be it on levels so diverse as tax or inheritance.

When settling in Switzerland, a foreign couple should thus determine the rules to be applied to the dissolution of their matrimonial property relations and – as the case may be – reach an agreement to modify such rules so as to correspond to their expectations and wealth planning goals.

Julien Perrin is an associate at Lenz ?& Staehelin www.lenzstaehelin.com/en.html

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