Special tax law challenges for cohabiting and patchwork families

Case 1: Cohabitation with residential property

Facts

Lea and Moritz have been living together with their two children in a detached house on the outskirts of Zurich for several years. Lea had grown up in this property and was able to take it over from her parents as an advance inheritance.

A regional bank granted Lea and Moritz a mortgage loan secured by the property for the renovation of the family home. The term is 10 years and the interest rate is 1%.

Lea and Moritz are not married. They have contractually regulated the duties of the family community as follows: Moritz pays the living expenses from his earned income and Lea takes care of the children. Accordingly, Moritz pays both the mortgage interest and the bills in connection with the maintenance of the property.

Questions

1. How is the property and debt recorded for wealth tax?
   a. In the case of sole ownership by the cohabiting partner?
   b. In the case of co-ownership or joint ownership?
2. Who pays tax on the imputed rental value?
   a. In the case of sole ownership by the cohabiting partner?
   b. In the case of co-ownership or joint ownership?
3. How is the debt interest deducted?
   a. In the case of sole ownership by the cohabiting partner?
   b. In the case of co-ownership or joint ownership?
4. Who can claim property maintenance?
   a. In the case of sole ownership by the cohabiting partner?
   b. In the case of co-ownership or joint ownership?

Case 2: Benefits to cohabiting partners

Facts

Anton lives with Mia and their minor children in his house in Wollerau. They have lived together for a long time. The children come from Mia's former cohabiting partner. He pays for the maintenance of the children.

Anton and Mia have contractually regulated the duties of the family community, with Anton contributing the majority of the financial resources and Mia contributing more to the care of the children. Anton is 100% employed.

Questions

1. How is Mia's free board and lodging taxed?
2. How is the court-ordered child maintenance taxed?

Case 3: Estate planning for patchwork families

Facts

Anna and Max have been married for 20 years and live in the canton of Valais. They each have a daughter from their first marriage. They also have a son together. The children are now of age and have completed their education.

Anna has assets of about CHF 10 million, which she inherited from her parents who have already died. Max has hardly any savings and does not expect to inherit any significant assets from his parents.

The spouses are concerned with estate planning. So far, they have neither concluded a marriage contract nor provided for an inheritance contract or a will.

The spouses want the surviving spouse to be able to use and consume the assets during his or her lifetime. Only upon the death of the second spouse should the descendants inherit in equal shares.

Questions

1. Who inherits and what are the tax consequences if the spouses die without a will or inheritance contract?
2. What structuring options and tax consequences are offered by the following instruments:
   a. Appointment of a successor
   b. Usufruct
   c. Bequest
   d. Waiver of compulsory portion
   e. Execution of wills