What Is a Life Annuity in Switzerland?
In Switzerland,a sale in life annuity involves a seller (crédirentier) who wishes to transfer a property, and a buyer (débirentier) who wishes to acquire it. To do this, the buyer pays an initial amount to the seller, called the bouquet. Thereafter, regular payments (called life annuities) are paid to the owner until the latter's death.
Conditions and Considerations
To conclude a life annuity in Switzerland, several factors need to be taken into account.
Age Restrictions
In general, the seller of a life annuity property must be over retirement age and be at least 70 years old. It is also recommended that the buyer be at least 20 years younger than the seller.
Notarial Deed
To protect both parties, it is also necessary to register the life annuity with a notary via a notarial deed. The latter sets out the existence and conditions of the life annuity and ensures that they are respected.
In particular, this enables you to decide who is responsible for the costs. A notarial deed can also be used to set a minimum duration for the payment of life annuities, to protect the seller.
Financing
On the financial side, there are a number of factors to consider. The initial payment, for example, should generally be between 20 and 30 % of the property's value. You will therefore also need to have the value of the property appraised.
Life annuities may be subject to a minimum duration, to protect the seller and their heirs. If the seller dies earlier than expected, the annuities will continue to be paid to the seller's heirs .
Tax Law
Possible taxes on this type of real estate purchase are defined by the cantons. These vary from region to region. For the seller, for example, a property gains tax will generally be levied at municipal and cantonal level.
The applicable rate varies from canton to canton and changes according to the length of time the property has been owned.
The different types of life annuity
In Switzerland, two types of life annuities exist. First, there is the "occupied life annuity", which is the most common one. There is also a rarer kind of life annuity; the "free life annuity".
Occupied Life Annuity
As the name suggests, in an occupied life annuity,, the seller transfers his property to the buyer, while retaining the right to live there until their death.
The buyer is therefore the owner, but cannot fully dispose of the property. In general, the buyer will also have to pay for major repairs, should they become necessary.
Free Life Annuity
In Switzerland, free is the opposite of occupied life annuity. In effect, a buyer pays the initial bouquet and life annuities in the same way as for an occupied life annuity, but is free to live in the property, rent it out or even sell it immediately.
The Advantages and Disadvantages of Life Annuities in Switzerland
A life annuity sale may present certain benefits but also disadvantages for both seller and buyer.
Advantages of a Life annuity in Switzerland
For the seller, the main advantage of a life annuity is the possibility of receiving additional income during retirement, without having to leave their home in the case of an occupied life annuity.
The seller can also reduce property-related expenses (property taxes, charges, etc.). For the buyer, buying a life annuity means becoming a homeowner at a lower price.
Disadvantages of a Life Annuity in Switzerland
Life annuities also have disadvantages. For example, if the seller's life expectancy is extended, the buyer will pay a higher amount than the value of the property. What's more, the buyer is generally not free to use the property as he or she sees fit, especially in the case of an occupied life annuity,.
The seller is also dependent on the buyer's financial capacity. If the buyer is no longer able to pay the annuities, the seller risks losing the annuity payments. In all cases, it is advisable to clearly define the terms of the life annuity contract to avoid any problems.
Frequently Asked Questions
What Is a Life Annuity in Switzerland?
In Switzerland, a life annuity sale involves a seller (crédirentier) who wishes to transfer a property, and a buyer (débirentier) who wishes to acquire it. To do this, the buyer pays an initial amount to the seller, called the bouquet. Thereafter, regular payments (called annuities) are made to the owner until the latter's death.
What are the conditions for concluding a life annuity in Switzerland?
To conclude a life annuity in Switzerland, several factors need to be taken into account, including age restrictions, the notarial deed and financing.
How old must a life annuity vendor be in Switzerland?
In general, the seller of a life annuity property must be over retirement age and at least 70 years old. It is also recommended that the buyer be at least 20 years younger than the seller.
Why do you need a notarial deed for a life annuity in Switzerland?
To protect both parties, the life annuity must also be registered with a notary via a notarial deed. This establishes the existence and conditions of the viager and ensures that they are respected.
How much is the bouquet in a life annuity in Switzerland?
The initial bouquet should generally be between 20 and 30 % of the property's value. It is therefore essential to have the value of the property appraised.
Are life annuities guaranteed to the seller's heirs?
Life annuities may be subject to a minimum duration, to protect the seller and his heirs. If the latter dies earlier than expected, the annuities will continue to be paid to the seller's heirs.
