Daniel Leu examines the information rights of heirs regarding Swiss bank accounts.
Although Swiss bank secrecy is under pressure and Switzerland is granting judicial assistance to foreign tax authorities in tax fraud cases, heirs may encounter problems when seeking information held by Swiss banks.
In the following, I will give an overview of the legal situation and the information rights which heirs can enforce against Swiss banks. Although this article refers primarily to ‘Swiss banks’, the information rights discussed below also exist against other financial intermediaries such as asset managers, wealth advisors or fiduciaries. However, since these other financial intermediaries are not subject to the Swiss bank secrecy laws, it might be easier to obtain information from them than from a Swiss bank.
A client may enter into several contracts with his bank or with other financial intermediaries. Although the main contract with the bank is usually a custodial contract, additional elements of agency agreements apply as well - hence, the bank acts as an agent for the client. According to the Swiss Code of Obligations (‘SCO’), an agent is obliged to give an account of his agency's activities at any time. This means that the principal is entitled to receive all relevant information in connection with the agency relationship on request. Such information includes, but is not limited to, current account statements: in addition, the principal is also entitled to receive information regarding payments received and made in the past, the performance history, portfolio composition and signatory rights.
This information right, which the principal cannot waive, passes to the heirs on the death of the principal. When and to whom the right passes depends on the applicable substantive inheritance law: If the deceased was living abroad, the rules on conflicts of law regarding his state of residence decide upon the applicable inheritance law.
Under Swiss law, each heir has the individual right to request information about the agency relationship between the financial intermediary and the deceased. Thus, the bank secrecy laws do not prevent the heirs from acquiring information on the banking relationship of the deceased. The heirs take over the position of the deceased and have the right to request the same information from the bank which the former principal was entitled to receive. Such request for information may also reveal the names of third parties who have received payments from the account of the deceased or made payments to that account. This may come as a surprise to some bank clients who may have hoped to keep the existence of their bank account and the existence of such third parties secret.
A practical limitation of the information right arises from the availability of the information. Swiss banks are obliged to archive account statements etc. for a period of 10 years. Bank statements are normally destroyed after ten years, whilst other information (e.g. account opening forms) is usually kept until 10 years after the bank account has been closed. Depending on the circumstances, it can thus be wise to formally request that the bank keep the records or to make a request for a preliminary injunction, which prohibits the destruction of these records, even after the period of ten years has lapsed.
The information rights discussed above are contractual rights which pass from the deceased to the heirs. However, such contractual rights exist only if there was a contractual relationship between the deceased and the bank. This is not the case if the assets were held through a trust, a foundation or a company. In such cases, the contractual relationship existed between the respective trustee or legal entity and the bank and therefore no information rights can pass to the heirs.
Signatory or information rights based on a power of attorney given by the trustee or the legal entity to the deceased person do not pass to the heirs, since according to Swiss law a power of attorney ceases to exist on the death of the empowered person.
In cases where the account holder was a trustee or a legal entity, the heirs can try to approach the trustee or the legal entity, or the service provider administering the legal entity, and request the information from them. This might be successful in cases where a contractual relationship existed between the deceased and the service provider and where the service provider is based in Switzerland. However, it is often difficult to obtain information from service providers be it because they are located offshore and do not respond to any requests, the information they have is very limited or because the heirs do not have any information rights under the applicable local law.
Although in such case the heirs cannot rely on a contractual information right under Swiss law, they may have an information right based on inheritance law.
Information Rights based on Inheritance Law
Under Swiss law, children, the spouse and the parents of the deceased have mandatory heirship rights. In order to enforce such rights, the Swiss Federal Supreme Court recognises a right of the respective heirs to receive information from banks even in cases where the deceased was only the ‘beneficial owner’ respectively the ‘economic owner’ of the assets. This information right is much narrower than a contractual information right, since it is limited to the information necessary to assess whether or not the mandatory heirship rights have been violated.
Whether a person is entitled to mandatory heirship rights depends on the applicable substantive inheritance law. In a newer case, the Swiss Supreme Court decided that information rights which heirs hold under an applicable foreign inheritance law must also be considered by the Swiss court. In the case in question, French law was applicable. Since mandatory heirship rights exist under French law, it remains to be seen whether a Swiss court would enforce information rights arising out of the applicable (foreign) inheritance law in a case where the claimant has no mandatory heirship right and is therefore not entitled to a certain part of the estate.
Many countries hold the heirs and/or the estate liable for the tax obligations of the deceased. The heirs may therefore have a legitimate interest in acquiring information about a Swiss bank account of the deceased.
Again, it depends on the applicable local law whether they are entitled to request the tax returns of the deceased from the competent tax authorities. The tax returns may reveal the existence of a Swiss bank account, but will often not contain the information necessary to reconstruct individual transfers made from or to the account. Cooperating with the local tax authorities can, under certain circumstances, protect the heirs from penalties. In addition, if the relevant conditions are met, the tax authorities may be able to obtain additional information through judicial or administrative assistance.
How to Proceed?
Heirs suspecting that the deceased had a Swiss bank account often encounter problems when they approach a bank and ask for information. In order to make a successful information request, an heir should gather all relevant documents showing that the account holder has died (ega death certificate) and that he is a legitimate heir of the deceased (eg a grant of probate). If the deceased lived abroad, the banks will usually require to see the original documents or notarized and apostilled copies.
The information can often be obtained more easily and quickly if a Swiss representative contacts the bank. Whilst involving such a representative can be helpful if the deceased was the account holder, it is highly recommended in more difficult cases where the deceased was only the ‘beneficial owner’or the ‘economic owner’ of the assets and the contractual partner of the bank was a trustee or a legal entity.
(Foreign) holders of Swiss bank accounts can make the life of their future heirs much easier by taking the potential legal and practical difficulties of their heirs into consideration when planning their estate. The name of the responsible account manager may, for example, help the heirs to receive the information they need.
On the other hand, it is important to know the information rights of the heirs and the limits of Swiss bank secrecy in connection with estate planning. Often, the goal is not to conceal anything, but to ensure that the estate can be distributed in a certain way or that a person is provided for. Careful planning, which considers the aspects of tax compliance and potential inheritance tax consequences, as well as mandatory heirship rights is thus crucial. Trusts or foundations can be expedient tools; however, in other cases a simple donation or a marriage contract will be a better way of achieving the desired end.
Each heir of the holder of a Swiss bank account has far-reaching information rights which can be enforced against the bank. The Swiss bank secrecy laws are not applicable in that situation. However, if a trustee or a legal entity holds the respective bank account and the deceased was only the ‘economic owner’ of the assets held in the account, it is much more difficult for the heirs to obtain information. In such cases, the heir may be legally entitled to receive information from the trustees or the legal entity, but depending on the jurisdiction where the trustee or the legal entity is domiciled, it can be difficult to enforce this right. Whether the heir of an ‘economic owner’ has an information right that can be enforced against a Swiss bank depends on the applicable substantive inheritance law. Compared with the contractual information rights, an information right based on inheritance law is much more limited and it is unclear whether a Swiss court would uphold such an information right unless the claimant is entitled to a certain portion of the estate under the applicable substantive inheritance law.
Information rights of the heirs as well as practical problems of the heirs in acquiring the necessary information in order to secure access to the assets held on Swiss bank accounts are aspects that should be considered when the holder of a Swiss bank account is planning his estate.
Dr Daniel Leu, Attorney at Law, Baer & Karrer Ltd., Zurich, Switzerland