Interaction between Hotchpot (Advancement) and Reduction in the Case of Gratuitous Lifetime Gifts

With the inheritance law reform that entered into force on 1 January 2023, the system of compulsory shares was significantly restricted or, in part, abolished. A central principle of the revised law is that the statutory compulsory portions may not be infringed by a will, a marriage or inheritance contract, or by lifetime dispositions made by the deceased. If such an infringement nevertheless occurs, the compulsory heir concerned may assert a claim for hotchpot (advancement) or reduction, or, in the event of a dispute, may enforce the compulsory share through litigation.

The following contribution is limited to situations in which a compulsory share is infringed as a result of lifetime dispositions made by the deceased and to the legal mechanisms available to safeguard the compulsory share.

Hotchpot / Advancement (Art. 626 et seq. SCC)

The law governing hotchpot is of a dispositive nature. Pursuant to Art. 626 para. 2 of the Swiss Civil Code (SCC), descendants are required to bring into hotchpot and have credited against their inheritance share everything they received from the deceased during the latter’s lifetime as marriage portions, endowments, transfers of assets, or debt remissions. Excluded from this obligation are asset transfers for which the deceased expressly released the descendants from the duty of hotchpot.

All other statutory heirs, such as spouses, parents, and siblings, are required to bring into hotchpot only those assets which they received from the deceased subject to an explicit obligation of hotchpot.

Reduction (Art. 527 SCC)

In contrast to hotchpot, reduction is of a mandatory nature and applies to all heirs, irrespective of whether the deceased provided otherwise by testamentary disposition or by any other means. Art. 527 SCC contains a numerus clausus of lifetime dispositions subject to reduction, whereby a single factual situation may fall under several grounds for reduction simultaneously.

According to Art. 527 SCC, dispositions subject to reduction include, in particular: lifetime gifts made as advancements on the inheritance share in the form of marriage portions, endowments, or transfers of assets where such gifts are not subject to hotchpot (no. 1); settlements of inheritance claims through buyout payments (no. 2); gifts that the deceased was free to revoke, or gifts made within the last five years prior to death, with the exception of customary occasional gifts (no. 3); and the alienation of assets undertaken by the deceased with the apparent intention of circumventing statutory restrictions on testamentary freedom (no. 4).

Interaction between Hotchpot and Reduction

While hotchpot (Art. 626 et seq. SCC) serves the purpose of ensuring equal treatment among heirs, reduction aims to protect heirs entitled to compulsory shares. As a consequence, lifetime dispositions may, in principle, be subject to both hotchpot and reduction. However, reduction is subsidiary to hotchpot. This means that assets already added back to the estate by operation of hotchpot rules cannot be added again to the net estate for the purposes of reduction.

As a result, an heir’s share of the estate is determined through a three-step calculation. The first step establishes the net estate, consisting of the estate assets minus estate debts and costs arising from the succession. In the second step, assets subject to hotchpot are added to the net estate, resulting in the partition estate. In the third step, the compulsory share calculation estate is determined by adding to the partition estate all assets subject to reduction, the surrender value of insurance policies, and the statutory participation in accrued gains. Only at this stage can it be assessed whether compulsory shares have been infringed and whether a reduction action may be brought.