Estate Planning Advice for SMEs and Shareholders in Geneva

Family foundations (or private foundations, although the term “private foundation” is not formally recognized under Swiss law as a category distinct from family foundations) are highly effective legal structures for estate planning and asset protection. They can be used in addition to a will and are particularly relevant for wealthy families or SME owners seeking a long-term solution.

• Asset protection: They allow the holding of various types of assets (financial, real estate, or equity stakes in SMEs) and protect them from potential external threats (creditors, legal disputes).
• Control and flexibility: You freely define the circle of beneficiaries of the foundation, as well as the rules and frequency of asset distribution. This enables you to preserve your wealth and ensure its long-term management over multiple generations while maintaining a certain degree of control.
• Structured transfer: These structures provide a framework for progressive and organized wealth transfer, avoiding the obstacles often associated with direct inheritance.

Certain types of life insurance policies are effective solutions for asset protection and estate planning, offering significant tax advantages.

• Wealth protection: By transferring your assets to a private wealth management life insurance policy (often referred to as a “capitalization” or “investment-linked life insurance”), you may benefit from asset protection against third-party claims in certain jurisdictions.
• Tax advantages: These products may offer significant tax benefits, particularly in terms of wealth tax and, in certain cases, inheritance tax, depending on the applicable legislation and country of residence.
• Flexibility: Unlike a “universal” life insurance policy focused on a high death benefit, private wealth management life insurance minimizes that coverage to reduce costs, concentrating instead on managing and protecting capital.

The professional pension system (LPP) is a fundamental pillar of your wealth and must be considered in any estate planning strategy.

• Statutory order of beneficiaries: As with inheritance law, the circle and order of beneficiaries under LPP benefits are defined by law. It is crucial to take this into account in estate planning to avoid unexpected outcomes.
• Bridging pension gaps: The Swiss pension system is experiencing a decline in conversion rates. Careful financial planning allows you to bridge pension gaps by using unrestricted individual pension solutions (Pillar 3b), where you can freely choose the circle of beneficiaries and investment strategies — offering flexibility not available in the mandatory second pillar. Buy-ins to the second pillar are also a major tax optimization tool.
• Tax optimization: Contributions to Pillars 3a and 3b may offer significant tax advantages, enabling you to build capital while reducing your current tax burden.

Real estate — whether owned by the SME or by the shareholder — is a major asset with complex inheritance and tax implications.

• Corporate real estate: If the SME owns real estate assets (commercial premises, income-generating buildings), their transfer upon the shareholder’s death must be carefully planned. This may involve transfer taxes, real estate capital gains taxes at the corporate or shareholder level, and valuation considerations.
• Shareholder’s personal real estate: The shareholder’s private properties are subject to inheritance and wealth taxes. Proper planning helps optimize the transfer of these assets, potentially through early gifting or specific legal structures.
• Real estate acquisition advice: RISTER also supports you in acquiring property, advising on the most tax-efficient and succession-friendly ownership structure.

Beyond post-mortem succession, incapacity planning is essential. Individuals and entrepreneurs would be well advised to draft an incapacity mandate to protect their family and business in the event of loss of mental capacity (due to accident, illness, etc.).

• Protection of interests: This mandate allows you to appoint one or more trusted individuals to safeguard your interests in areas such as personal care, asset management, and legal relations with third parties.
• Business continuity: For SME owners, an incapacity mandate is crucial to ensure business operations continue smoothly, avoid management paralysis, and protect the value of professional assets.