Gift Agreement: General Information and Content

The gift contract is regulated in Articles 239 to 252 of the Swiss Code of Obligations (CO) and forms the legal framework for gifts of all kinds, e.g., of land, real estate, or money. The gift contract regulates the most important aspects of the transfer of assets, regardless of the type of gift and the relationship between the donee and the donor. If the gift involves real estate or a promise of gift is made, the gift contract must also be notarized.

One of the most important requirements for the validity of a gift is that the donor enriches the donee(s) with their assets without consideration. A gift requires the consent of both the donor and the donee, both with regard to the purpose of the gift and the associated conditions.

When is a gift contract necessary?

Whether a gift contract is necessary depends primarily on the object of the gift. If the gift involves valuable items, a large sum of money, or real estate, a gift contract may be advisable, but is not mandatory. However, promises of donation and gift contracts for real estate must always be in writing according to Articles 242 and 243 of the Swiss Code of Obligations.

The purpose of such a gift contract is to legally document the gift and dispel any doubts that the transfer is not a gift but a loan. Furthermore, the donor can specify the conditions for the gift in a gift contract. If these conditions are not met, the donor can sue for the restitution or return of the gift in accordance with Articles 245 and 246 of the Swiss Code of Obligations.

If the gift contract is a promise of gift, i.e., a binding agreement regarding a future gift, it must be drawn up in writing and also notarized. In the case of a so-called hand-made gift, i.e., when the donor gives the recipient a usually smaller gift, the contract is free of form and can also be concluded orally (Article 242 of the Swiss Code of Obligations).

A gift agreement must meet certain formal and substantive requirements to be legally valid. For this reason, it is advisable to seek advice from a lawyer specializing in inheritance law when drafting a gift agreement. Below are some important points to consider when drafting your gift agreement.

When concluding a gift agreement, the donor reserves the right to revoke the gift. However, certain conditions must be met. According to Article 250 of the Swiss Code of Obligations, a promise to make a gift can be revoked if:

• the donee has committed a serious criminal offense against the donor or their relatives.
• the donee has seriously violated their legal obligations to the donor or their relatives.
• the donee fails to fulfill the conditions associated with the gift for incomprehensible reasons.
• the donor’s financial circumstances have changed so significantly that the donation would place a disproportionate burden on them.
• the donor has incurred significant, unforeseen family law obligations.

The promise to make a gift also becomes invalid if bankruptcy proceedings are initiated against the donor.

Tip: If the donation has already been completed or if it is a hand donation, you can reclaim it for reasons 1-3 above in accordance with Article 249 of the Swiss Code of Obligations.

The Reversion Provision

According to Article 247 of the Swiss Code of Obligations (OR), a gift contract can also stipulate what is known as the reversion of the gift. If the recipient dies before the donor, the gift itself reverts to the donor. The primary purpose of this agreement is to prevent the gift from passing to the recipient’s descendants or legal heirs.

Which assets cannot be the subject of a gift?

There are certain assets that, by law, cannot be the subject of a gift. This includes assets that have been seized, placed under receivership, or that belong to a person who is bankrupt. Furthermore, assets subject to the marital property regime and over which the spouses jointly dispose cannot be the subject of a gift.

It is possible that the recipient of the gift will have to pay taxes on the gift received. The exact amount of tax depends on the value of the gift. However, there are exceptions to the taxation: household furniture and personal belongings, for example, are not taxed. Depending on the relationship between the donor and the recipient, other types of gifts may also be tax-free. This generally applies to spouses, registered partners, direct descendants, and adopted or stepchildren who have received or will receive a gift.

Gift tax varies from canton to canton and is primarily intended to prevent inheritance tax from being evaded through gifts. The deadlines for declaring a gift received also vary from canton to canton. In any case, gifts must be declared as part of the recipient’s assets in their tax return.

Advantages and Disadvantages of Gifts in Switzerland

Gifts have many advantages, but also some disadvantages. One of the advantages is that the donor can, for example, transfer a property to the beneficiary without waiting for the inheritance to occur, i.e., during their lifetime. This also has the advantage of avoiding disputes over inheritance that can arise when a will is probated. Finally, gifts also have the advantage that the costs associated with the transfer of ownership can be covered immediately.

However, gifts also carry certain risks. For example, by deciding to gift their property, the donor loses full ownership and all rights to the asset in question. A further risk arises when making a gift to a legal heir. Other heirs of equal rank in the line of succession may feel disadvantaged compared to the recipient and demand or sue for compensation for the gift in the event of the inheritance.

Restrictions on Gifts After the Conclusion of an Inheritance Contract

It should be noted that gifts after the conclusion of an inheritance contract have been more strictly restricted since the 2023 revision. Dispositions mortis causa and gifts made during one’s lifetime – with the exception of customary occasional gifts – can be contested if they conflict with the obligations under the inheritance contract and are not expressly reserved in the inheritance contract.

It is therefore crucial to specify in the inheritance contract whether and to what extent the testator may make gifts after the conclusion of the inheritance contract. Existing inheritance contracts should therefore be reviewed and amended if necessary.

Tip: To avoid potential negative consequences of a gift, it is advisable to seek legal advice and draw up a gift contract. A lawyer specializing in inheritance law can adapt this contract to your individual situation and draw up a legally secure agreement to cover any unforeseen eventualities, so that your gift ends up in the right hands and enriches the recipient.