Passing on property: right of residence, equalisation and tax

Passing on a property is rarely a pure inheritance question – it is about housing, money and fairness between siblings, usually all at once. If you want to hand the house over during your lifetime and carry on living in it, that is arranged through a right of residence or a usufruct in the land register. If you have several children, equalisation needs settling before the dispute arises. And property gains tax does not disappear on a gift; it is merely deferred. All three can be resolved cleanly during your lifetime – afterwards they cannot.

Advance on inheritance or gift: what it means

A property can be transferred during your lifetime. Formally this requires notarisation and entry in the land register – a family agreement is not enough.

It makes sense where a child will take over the property anyway and wants to live there, or where you want to settle matters while everyone involved can still have their say. Five questions belong in writing:

• Who receives the property, and at what value?
• Will that value be set against the estate later?
• Are there other heirs whose statutory shares must be respected?
• Will a parent stay living there – with a right of residence or a usufruct?
• Who bears the mortgage, upkeep, taxes and service charges, and from when?

The last point is the one most often forgotten and the most likely to cause friction day to day.

Right of residence or usufruct: the comparison

This is the heart of the matter for anyone transferring but staying put. Both rights are entered in the land register and therefore protect you against later purchasers as well.

	Right of residence	Usufruct
Scope	living there yourself	broad use, including letting
Income	none	stays with the beneficiary
Transferable	no, strictly personal	generally not transferable, but income usable
Ordinary maintenance	usually the beneficiary	generally the usufructuary
Major repairs	generally the owner	generally the owner
Imputed rental value	depends on the arrangement and canton	generally the usufructuary
Effect on value	reduces market value	reduces market value more

In practice: the usufruct is the stronger right and reduces the property’s value correspondingly more. It suits you if you want to stay flexible and might let the property later – for instance when moving into assisted living. The right of residence is narrower and fits where it really is only about living there yourself.

How these rights are valued – through the capitalised value of use – is covered in the guide on valuing your home before a move. That figure is not a formality: it determines how large the advance to be equalised turns out to be.

Equalisation: the most common source of dispute

If a child receives the property below market value, the difference counts as an advance and must generally be equalised when the estate is divided. And here is where families fall out years later: what often counts is the value at the time of division, not at the time of transfer.

An example: the daughter takes over the house in 2026 for CHF 600 000 when the market value is CHF 900 000. The advance is CHF 300 000. If the house is worth CHF 1 300 000 when the parents die in 2040, the discussion is no longer about CHF 300 000 but about a correspondingly higher figure.

So two things belong in the transfer contract: a defensibly determined value at the time of transfer – ideally a market-value appraisal – and an express provision on whether and how equalisation applies. Both can be agreed differently, but only expressly.

Statutory shares: what applies since 2023

Since 1 January 2023 statutory shares have become smaller. The share for descendants is now half of their legal entitlement instead of three quarters. The parents’ statutory share has been abolished entirely. For the surviving spouse it remains one half.

In practice: the freely disposable portion has grown. Anyone wanting to favour one child deliberately – the one who cared for the parents, or who took over the house – has more room than before. But that room can only be used through a will or an inheritance contract; without a disposition, the statutory order of succession still applies.

Tax: what falls due and what is merely deferred

Inheritance and gift tax. There is none at federal level; taxation is cantonal. Spouses and direct descendants are privileged or fully exempt in many cantons. Check the specific canton before planning.

Transfer, notary and land registry fees. These arise on a gift too, though sometimes at reduced rates. Orders of magnitude are in the guide to purchase costs.

Property gains tax. The most important point: on a gift or advance it is generally deferred, not waived. The latent tax remains attached to the property and falls due when the recipient later sells – calculated from the parents’ original purchase price. Anyone taking over a property takes over a tax burden that the transfer price often does not reflect. Talk about it before anything is signed.

General information is published by the Federal Tax Administration FTA; the cantonal rules are with your cantonal tax administration.

When one child takes over and the others are paid out

This is the most common case – and it regularly fails at the bank, not through lack of goodwill.

The child taking over usually has to raise a mortgage to pay out the siblings. The bank then assesses loan-to-value and affordability as for any purchase: for owner-occupied property the maximum is frequently around 80 per cent of the value, and income must carry imputed interest, maintenance and amortisation.

Two things complicate it further. A registered right of residence or usufruct reduces the lending value – the bank finances less than the unencumbered value suggests. And if the parents still hold a mortgage, it must be settled who takes it on. So clarify the financing before the notary appointment, not after.

How banks calculate after retirement is covered in mortgages after retirement.

What you can settle now

1. Have the market value determined before anything is transferred – jointly and neutrally.
2. Talk to all the children, not only the one taking over. Surprises are the main cause of inheritance disputes.
3. Draw up a will or inheritance contract. An inheritance contract binds the parties and gives the most certainty.
4. Choose a right of residence or a usufruct and have it entered in the land register.
5. Settle the advance care directive and living will at the same time – they belong to the same planning and are often forgotten.
6. Get professional support: notary, tax adviser and bank. The best solution depends heavily on the canton, the family situation, the value and the existing mortgage.

Summary

• A lifetime transfer requires notarisation and a land register entry – a family agreement is not enough.
• A right of residence and a usufruct both secure your housing; the usufruct is stronger and reduces value more.
• Equalisation often follows the value at the time of division, not transfer – an appraisal at transfer prevents disputes.
• Since 2023 statutory shares are smaller: half for descendants, none for parents. The room this creates needs a will to use.
• Property gains tax on a gift is deferred, not waived – it stays attached to the property.
• Settle the financing for the child taking over before the notary appointment, not after.