There are two requirements: A person who buys a life insurance
policy from a Swiss insurance company must designate his or her spouse or descendants, or
a third party (if done so irrevocably) as beneficiaries. Also, to avoid suspicion of
making a fraudulent conveyance to avoid a specific judgment, under Swiss law,
| the person must have purchased the policy
or designated the beneficiaries not less than six months before any bankruptcy decree or
collection process. |
The policyholder can also protect the policy by converting a
designation of spouse or children into an irrevocable designation when he becomes aware of
the fact his creditors will seize his assets and that a court might compel him to
repatriate the funds in the insurance policy. If he is subsequently ordered to revoke the
designation of the beneficiary and to liquidate the policy he will not be able to do so as
the insurance company will not accept his instructions because of the irrevocable
designation of the beneficiaries.
Article 81 of the Swiss insurance law provides that if a policyholder has made
an irrevocable designation of spouse or children as beneficiaries, they automatically
become policyholders and acquire all rights if the policyholder is declared bankrupt. In
such a case, the original policyholder automatically loses control of the policy and his
right to demand the liquidation of the policy and the repatriation of all funds. A court
therefore cannot compel the policyholder to liquidate the policy or otherwise repatriate
his funds.
If the spouse or children notify the insurance company of the bankruptcy, the
insurance company will note that fact in its records. Even if the original policyholder
sends instructions because a court has ordered him to do so, the insurance company will
ignore those instructions. It is important the insurance company be notified promptly of
the bankruptcy, so that they do not inadvertently follow the original policyholder's
instructions. This is also true for pending legal action or judgments.
If the policyholder has designated his spouse or children as beneficiaries of
the insurance policy, the insurance policy is protected from his creditors regardless
whether the designation is revocable or irrevocable. The policyholder may therefore
designate his spouse or children as beneficiaries on a revocable basis and later remove
this designation before the policy expires if at such time there is no threat from any
creditors. These laws are part of fundamental Swiss law. They were not created to make
Switzerland an asset protection haven.
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