Right of use and inheritance law: who owns the house?
As a beneficiary, you can transfer your house to your children, but continue to live in it or rent it out. How is a right of use created and what is the difference compared to a right of residence? Comparis provides the answers.
30.06.2022
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1. What does a right of use mean?
With a right of use, also referred to as usufruct, you get the right to use an asset and retain income from it. The law applies to objects of value or securities – such as vehicles, equipment, or shares.
In practice, the right of use is often related to residential property in the family: beneficiaries may live in the building, rent it out and retain the rental income.
However, the authorized person also has obligations: they must ensure the preservation of the value of the property and pay for regular maintenance, any mortgage interest and taxes. They may not significantly change the house and its exterior. In addition, they may only take out an additional mortgage in agreement with the legal owner.
An elderly couple lives in their own house and rents out a section of it. If one of the spouses dies, the joint children inherit part of the house. They could insist on having their inheritance paid out, which would require a sale of the house.
The couple plans for this eventuality. Both grant the other rights of residence in the will. Thus, in the event of death, the surviving spouse can stay at home and keep the rental income.
An elderly couple has two adult children and lives in their own home. The couple fears that they will have to sell their house in a few years to pay for care costs.
The couple transfers their home to their children during their lifetime in conjunction with the right for them to continue living in the property. The couple cannot now be court-ordered to sell their house to pay any high care costs. They may both continue to live at home and keep possible rental income. This usually also applies if the couple becomes dependent on care or incapacitated.
Furthermore, the family support obligation must be taken into account: Well-off descendants may be obliged to support parents in need. This also applies to existing rights of use.
2. How is a right of use created?
A right of use is created as follows: by granting the right during your lifetime, by will or inheritance contract, or by a legal claim to have that right granted.
Legal owners may contractually agree a right of use with the future beneficiaries. The following applies: in the case of real estate, the right only becomes effective after public notarization of the contract and entry of the right in the land register.
By means of a will or contract of inheritance, testators may grant their spouse or another person a right to use their property within the scope of the freely disposable part of their estate. This is the part that is not covered by the portions that must, by law, go to close relatives.
Rights of use to the next generation’s inheritance
Under inheritance law, spouses may also apply the right of use to the inheritance to which their children are entitled. This increases the latter’s shares of the estate. With this solution, you automatically receive half of the total estate – albeit encumbered with a right of use. The usual statutory portion for descendants that is not subject to a right of use is only a quarter.
In the event of death, the surviving spouse may claim the right to use the home left by the deceased. The court determines whether this right is granted. The testator can exclude this right of use before they die by means of a will or marriage contract.
3. What do I have to pay as the beneficiary of a property?
Those holding rights to use a property must pay for the following:
Recurring costs: these include heating and electricity costs, mortgage interest and premiums for building insurance.
Taxes: the house is taxed as an asset, and you must pay income tax on the imputed rental value or actual rental income. In some cantons, beneficiaries also have to pay cantonal property tax.
Ordinary maintenance of the property
As a rule, the legal owners must pay for major investments, such as replacing the heating.
4. How does the right of use lapse?
According to the Civil Code, the right expires upon the death of the beneficiary or after a maximum period of 100 years. Beneficiaries can also sign a waiver agreement and have their right deleted from the land register.
What happens if the beneficiary becomes incapacitated – for example due to dementia? As a rule, the right remains in force even then. It can be cancelled only if the right of use is bound by contract or a declaration of intent to the legal capacity of the beneficiary.
5. Right of use to property: how it differs from the right of residence
With both a right of use and a right of residence, you are assured under Swiss law that you, as beneficiary, may continue to live in the building.
So how do they differ? In summary, beneficiaries have more rights, but also more obligations in connection with the property entrusted to them.
| Right of use | Right of residence | |
|---|---|---|
| What rights of use do I have? | You may live in the house free of charge or rent it out. The rental income is yours. | You may live in the house free of charge. |
| What costs do I have to pay? | Ancillary costs, mortgage interest, insurance and ordinary maintenance | Ordinary maintenance |
| What do I have to pay tax on? | Wealth tax, imputed rental value or rental income, property tax (dependent on the canton) | Imputed rental value |
6. Can I sell the property despite the right of use?
The legal owners may sell a property at any time. However, an active right of use that is entered in the land register remains in place. In principle, beneficiaries have no say in any property sale.
Good to know: in practice, widows and widowers are often both beneficiaries and co-owners of the property in question. They can only sell together with the other owners.
However, a right of use reduces the market value of the property and makes the sale more difficult. For a successful sale, it is usually worthwhile encouraging beneficiaries to delete their right of use.
Get an estimate of the value of the property
How much is the property in question worth? The free online property valuation tool from Comparis will help you to get an initial impression of the market value of your property.
7. Summary: when does a right of use make sense?
Granting the right to use a property makes particular sense if you are transferring assets to your future heirs during your lifetime. In this way, spouses can pass on their assets to their children, but largely retain their rights and obligations in connection with the house.
Another option is to provide a form of security for your spouse. By granting a right of use in a will or marriage contract, the surviving partner can continue to live at home and benefit from potential rental income.
Depending on the savings, income and family situation, a right of use can also make sense for tax reasons. Get tax advice and find out whether a right of use is worthwhile for you.
