Covid-19 crisis – Succession planning and planning for incapacity
Covid-19 crisis – Succession planning and planning for incapacity
The second wave of Covid-19 in this fall 2020 has shown that the virus is not yet under control and that it may still take us a long time to go back to a new normality.
The pandemic has given us time to reflect, prioritize and take up projects that were on stand-by because of our busy lives. Many clients have had time to dedicate to solving family matters and have approached us to set up or review their estate planning and to establish mechanisms to protect them and their families in case of incapacity.
Broadly speaking, this includes last wills, durable powers of attorney, patient decrees or living wills and any practical or legal measures which can be set up to organise one’s affairs in the event of death or durable incapacity. Different legal tools can be used to plan and to reduce the number of difficult decisions a family has to take when facing a dramatic, unexpected event, such as the death or the sudden accident of one of its beloved ones.
I. Is your last will up-to-date?
A last will is a living document. As your life and business situation changes, your estate, assets, family relations etc. also change, and your last wishes may need to reflect these changes. You should therefore regularly review your last will to ensure that it corresponds to your wishes and your particular situation. Especially, you should make sure that it is adapted to any new circumstances and to the applicable legal provisions, both from a civil and a tax point of view.
In Switzerland, a testator may write a last will by hand (holographic form) or make it before a notary public (public deed form). In case of imminent risk of death, it is also possible to make an oral will by declaring the wishes in front of two witnesses and instructing them to draw up a testament in the form of a public will. This document is, however, limited in time and if the testator survives, it loses effect.
Pursuant to Swiss International Private Law, Swiss law will apply to the estate if the deceased’s last domicile was in Switzerland. That being said, any foreigner living in our jurisdiction may choose the application of the law of his/her nationality by making a professio juris (choice of law). Swiss nationals living abroad may equally chose the application of the law of their last domicile.
It should be noted that Swiss law knows forced heirship rules that e.g. protect the surviving spouse and the descendants, or the parents in the absence of spouse and descendants.
Also, in case you are married, attention must be paid to the applicable matrimonial regime as it has consequences on any succession. Upon the death of one spouse, the matrimonial regime is first dissolved to establish whether matrimonial assets fall into the estate of the deceased spouse. Then, the estate of the deceased is established and liquidated. Consequently, the amount entering into the estate will depend on the matrimonial regime dissolution.
In your estate planning, the choice of the matrimonial regime can have a substantial impact on the assets left to the surviving spouse. In Switzerland, pre-nuptial agreements are common to govern this aspect. Post-nuptial agreements are also possible with retroactive effect under certain conditions.
II. Is a durable power of attorney for the case of your incapacity in place?
In case you have a temporary or durable incapacity, a person or an authority will have to intervene to conduct your business and decide on your personal matters, as you will not be able to do it.
Swiss law provides that the spouse or the registered partner has to protect the interests and assist the other spouse/partner. The first can hence settle the incapacitated person’s day-to-day affairs but cannot make any key decisions. For instance, to buy or sell real estate for the incapable, an application to the Child and Adult Protection Authority is necessary.
Single persons or those without close relatives nearby capable of taking care of their affairs will have a curator appointed by the Child and Adult Protection Authority.
In order to control who should take care of your matters in case of incapacity, you have the possibility to appoint a private representative in a durable power of attorney. You will so be able to avoid the intrusion of the state, an unknown third party, or an unwanted person. This solution also prevents the nomination of an official curator who does not know you, your family, the peculiarities of your situation, and your wishes.
A representative nominated by you and of your trust will receive clear indications on how to manage your assets and personal matters and act in your best interests. Such a solution is all the more recommended in complicated family matters or for persons without close relatives.
As regards to the form, according to Swiss law, advance care directives must be made in the same form as a last will (either holographic or before a notary public).
III. Is your patient decree or living will available?
Most of us are afraid of losing our reasoning powers or of being unable to communicate our wishes relating to care and medical treatments but often we avoid finding a solution in advance, as the matter is not easy to address. However, family members who are confronted with a relative who is no longer able to decide on these matters are subject to enormous pressure and stress because they wish to make the right decisions, and this may be difficult or subject to different opinions.
The decision may include deciding on whether life sustaining measures should be continued. These questions are not often discussed among family members, as they relate to difficult and intimate topics. However, it is recommended and necessary to do it in order to take away this burden from family members.
In Switzerland, you can decide in advance which care and therapeutic measures you wish to receive if you are not able to make decisions by yourself. These so-called “patient decrees” can be more or less detailed and can form part of a durable power of attorney or be made separately.
You should provide your patient decree to your family doctor or to some family members to make sure they are informed. Equally, you can download it on an online platform or add a special note regarding the decree on your Swiss insurance card. In any case, several of your trustworthy relatives should know where the document can be found.
Drafting a patient decree will save your family and/or relatives from having to make painful decisions. It will also avoid having your relatives fighting over what they believe would be your true medical instructions and wishes.
IV. Can somebody of your trust access your bank account to ensure liquidity?
In case of an unexpected illness, sudden incapacity and/or accident, it is important that someone of your trust is able to access your accounts to ensure not only your day-to-day payments but also the settlement of extraordinary bills that may be related to the situation.
A banking power of attorney appointing a trusted person (the proxy) to act on your behalf and in your best interests should hence be signed. In order to reduce chances of abuses, you can appoint two persons with joint signatory powers.
This solutions is easy to put in place as the powers granted to the proxy can be cancelled at any time by sending a written order to the bank, provided however that you are mentally capable.
V. Your digital estate: is the information about your accounts/digital assets/codes etc. save and accessible?
Nowadays, most of us use Facebook, Instagram, tweeter, LinkedIn. At the same time, we do not realise the digital print we leave on the internet. We may also have cryptocurrency accounts that are only accessible with a code.
As we usually do not share our passwords/codes and we are advised not to write them down, turning off our social media accounts or accessing our cryptocurrency accounts can create a problem after one’s death.
You shall hence keep an overview of your online activities and delete any unused user accounts. At the same time, you should to make a list of all your online accounts, including their passwords and keep them in a safe place; and do not forget to inform a trustworthy person or your executor of the location of this list.
Equally, you could draw up this information in a side letter attached to your last will and indicate what you wish to be done by your heirs in this context.
Finally, automatic online payments and transfers should be listed in order to be promptly cancelled.
VI. Have you established an inventory of your assets?
Tax returns often serve the purpose of establishing an inventory of the deceased’s assets. However, in this document, for couples married under the ordinary regime, no distinction is made between personal and acquired properties. And this differentiation is of outmost importance as it can impact in a significant way the size of the estate.
This is why spouses, before or during marriage, often make private inventories of their assets, indicating which is acquired property and which individual, either in the form of a private agreement or before a notary public.
In the event of one of the spouses’ death, the inventory will facilitate the liquidation of both the matrimonial regime and the estate. It will also help avoiding or weakening your heirs disputing the qualification of some assets.
VII. Have you dealt with issues that you do not wish your family/heirs to know?
Every family has its secrets and surprises; every individual has its private matters. To protect some of your relatives or to avoid any legal dispute among your heirs, we recommend to plan ahead and implement solutions.
Creative answers can be found, for instance, to favour some heirs, to bequest non-family members (within the limits of the applicable laws).
RFF Lawyers is a tax law “boutique” firm in Portugal, specialized in tax and business law, both for corporate and institutional entities and individual clients. Rogério and his team at RFF Lawyers seek to foster lasting relationships - of confidence and trust - and to provide the proper legal solutions meeting the specific needs of each client, whether individual or corporate.
