The US is currently the second most important trade partner of Switzerland and the most important investment location for Swiss companies. Moreover, offices of American companies located in Switzerland contribute considerably to Swiss prosperity1. This is one of the reasons why, according to the statistics on foreigners of the Federal Office of Migration, 17,648 US citizens (other than dual citizens) were permanent residents of Switzerland as of November 20152. It is estimated that around 100,000 Swiss-American dual citizens live in Switzerland. At the same time, most Swiss citizens who live outside of Europe reside in the US. The number of Swiss citizens living in the US amounted to 78,696 as of the end of 20143.
In the context of Swiss-American succession, US tax and succession law must be considered in addition to Swiss law. This arises, for example, when counseling American citizens with residence in Switzerland or Swiss citizens who own US real estate or US securities. There is a considerable potential for conflict when it comes to succession planning because the Swiss and US succession and tax laws are organized differently and are not compatible in all aspects. In international succession matters between the US and Switzerland it is also important to consider the Swiss-American treaty of friendship, commerce and extradition of 25 November 1850 (subsequently "Treaty")4. Articles V and VI of the Treaty which address conflict of law issues are particularly significant.
Before dealing in detail with the handling of Swiss-American estates, the principles of US matrimonial property and succession law must be examined in order to understand the problems arising in connection with such estates. Specific references to US law refer to the state of New York.
II Principles of US Matrimonial Property and Succession Law
There is no uniform US matrimonial property and succession law. Each of the 50 federal states has its own conflict of law rules and substantive matrimonial property and succession law. Attempts to comprehensively harmonize the private law of the federal states by way of Model Laws such as the Restatements5 and the Uniform Probate Code, which were recommended to the individual states for adoption and for the transformation of their legislation, have remained widely unsuccessful. The Restatements have influenced the succession laws of certain states and some states have at least adopted parts of the Uniform Probate Code6.
US succession law – which derives from British succession law (common law) – differs fundamentally from continental European law which is based on the Roman judicial system7. Each state distinguishes between succession (substantive succession law) and administration (formal handling of an estate). Thereby, the administrator collects the estate, pays the debt of the decedent and distributes the balance of the assets to the heirs. If a will exists, the probate court examines the formal validity of such will in a probate proceeding before it takes effect8. While administration is handled similarly in most states, substantive succession law is organized very differently across the states9. In New York, the substantive succession law is found in the Estates, Powers and Trusts Law (E.P.T.L.) and the provisions on the formal handling of the succession (probate and administration) are contained in the Surrogate's Court Procedure Act (SCPA). Conflict of law provisions can be found in both acts.
The continental European succession law follows the principle of universal succession, according to which the estate passes immediately to the heirs. US law, by contrast, follows the principle of special succession. The estate is divided into immovable property and movable property, the latter being transferred to an administrator, the personal representative, who is under judicial supervision and responsible for payment of the decedent's debt and distribution of the estate assets10. The immovable property of the decedent, however, descends directly to the heirs, but may be under the care of the administrator under certain circumstances11.
In contrast to Switzerland, which follows the principle of unity of the estate, US law provides different legal frameworks for movable and immovable property. The succession rules are determined according to lex rei sitae for immovable property, while movable property is subject to the law of the last domicile of the decedent, which leads to a scission of the estate12.
2 Marital Property Law in the US
In the US, there are two types of matrimonial property regimes: (i) common law and (ii) community property. Nine states13 have adopted a community property regime which originates from the Spanish-French influence in the colonial period. There are many similarities across the nine states and their provisions resemble those of the Swiss community property regime14.
The remaining states are common law states. As the surviving spouse would not otherwise have any automatic claim to the decedent's property in case of death, the older laws of the common law states provided certain rights to use immovable assets for the protection of the surviving spouse (e.g., dower and curtesy) 15. Today most common law states, including New York, provide for a statutory forced share for the surviving spouse which is called the "elective share"16 (see chapter II.3.2 below). In New York, the common law property regime is only applicable in the case of death and not in case of divorce17. Other states also make the distinction between death and divorce when it comes to the division of matrimonial property, therefore the local legislation should be considered.
If spouses change their residence from a common law state to a community property state or vice versa, the applicable law for real property remains the law of the location of the property (lex rei sitae)18. If the spouses own real property in a community property state, this property is subject to the community property regime even if the rest of the property is subject to the property regime of the new domicile19.
Personal property acquired prior to the change of domicile remains subject to the property regime of the former domicile. If the spouses moved from a community property state to a common law state, each spouse is entitled to half of the assets that were part of the community property until the change of domicile. The assets acquired after the change of domicile are subject to the common law property regime. In the reverse case, each spouse is entitled to his/her own property which he/she owned prior to the change of residence and property acquired after the change of domicile will be community property20. These rules are also generally decisive for spouses who move to the US from a foreign state, for example Switzerland, and vice versa21.
Generally, community property states as well as common law states allow spouses to determine the ownership of their separate and matrimonial property in a marriage contract entered into either before or after the marriage22. If and under what conditions foreign marriage contracts are recognized in the US is subject to the legislation of the respective US state. In the state of New York, foreign marriage contracts are generally recognized23, whereby the independent representation of spouses and the disclosure of the financial situations is not mandatory but recommended when the contract is concluded.
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1 Economiesuisse, treaty with the US important for economy, press release of 26 April 2010.
2 Number of permanent foreign citizens, end of November 2015, Federal Office of Migration.
3 58,201 of which were dual citizens. 2014 statistic of Swiss living abroad, Federal Department of Foreign Affairs, Bern.
4 SR 0.142.113.361, entered into force on 8 November 1855 (The French and English text of the treaty is relevant).
5 The relevant Restatements are the Restatement (Second) of Conflict of Laws and Restatement (Third) of Property: Wills and Other Donative Transfers.
6 Uniform Law Commission: http://uniformlaws.org/LegislativeFactSheet.aspx?title=Probate Code, last visited 5 January 2016.
7 The judicial system of the state of Louisiana, however, is based on Napoleon's code civil due to the influence in colonial days.
8 MARKUS FREY, US-Amerikanische Grundstücke in einem schweizerischen Nachlass, Diss. Zurich 1986, 68f.
9 G.WARREN WHITAKER in: International Succession, 3rd edition, Oxford University Press, UK 2010, N 50.01.
10 HANS RAINER KÜNZLE, Der Willensvollstrecker im schweizerischen und US-amerikanischen Recht, Zurich 2000, 49.
11 MURAD FERID/KARL FIRSCHING, Internationales Erbrecht, Vol. 8, Schweiz, N 69; Frey, (Fn. 8),79.
12 FREY, (Fn. 8), 48, 51 et seq.; FERID/FIRSCHING, (Fn. 11), N 38, N 40.
13 The community property-states are: Arizona, California, New Mexico, Idaho, Louisiana, Nevada, Wisconsin, Texas and Washington.
14 Cf. EUGENE SCLOES/PETER HAY, Conflict of Laws, 2nd edition, St. Paul Minn., 1992, § 14.3; FERID/FIRSCHING, (Fn. 11), N 90
15 SCOLES/HAY, (Fn. 14), § 14.2.
16 EPTL §5-1.1.
17 SCOLES/HAY, (Fn. 14), § 14.4.
18 SCOLES/HAY, (Fn. 14), §14.6.
19 SABINE PEGORARO-MEIER, Die Abwicklung des Nachlasses im Verhältnis Schweiz-USA, Diss. Basel, 1992, 6.
20 SCOLES/HAY, (Fn. 14), § 14.4 et seq., § 14.9.
21 PEGORARO-MEIER, (Fn. 19), 7.
22 SCOLES/HAY, (Fn. 14), § 14.15.
23 Cf. JOHN TEITLER/NICHOLAS LOBENTHAL/PAUL GETZELS in: Family Law, Jurisdictional Comparisons, 1.edition, London 2011, 450.
This article is based on the speech of Tina Wüstemann regarding the Swiss-American Succession of 30 August 2012 at the 7. Schweizerischen Erbrechtstag in Lucerne.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.