Life annuities will become more attractive from 1 January 2025

• Inheritance Law
• Private Clients

The change in the taxation of life annuities from January 1, 2025 means that the life annuity instrument will once again become a more attractive option for inheritance planning and structuring.

Currently, life annuities are excessively taxed (40% as income and 60% as a tax-free capital repayment). They were therefore not considered as inheritance law instruments. In future, the taxable income portion of the guaranteed pension benefit for life annuity insurance policies will be calculated in accordance with the Insurance Contract Act depending on the maximum interest rate of the Swiss Financial Market Supervisory Authority FINMA. Any surplus benefits will be taxable at 70 percent. For life annuities and pledges in accordance with the Swiss Code of Obligations and for foreign life annuity insurance policies, the taxable portion of income is now calculated based on the average yield of ten-year federal bonds.

An annuity term of 22 years is assumed when calculating the taxable income portion of the life annuity. Life annuities therefore become more attractive and more tax-efficient the longer they last.

The new provisions also apply to existing life annuity insurance policies and current life annuities.

AMATIN’s inheritance law team will increasingly consider the option of life annuities again when structuring and planning inheritance law.