Cohabitation or Marriage: The Financial Differences Few People Know

More and more couples in Switzerland live together without marrying – often for decades, with children, a house and joint accounts. In everyday life, the difference from marriage is invisible. The law, however, simply does not recognize cohabitation: legally, cohabiting partners are strangers to each other. What that means becomes clear in four systems.

Inheritance law: Without a will, the partner gets nothing

Cohabiting partners have no statutory right of inheritance. If a person dies without a will, their relatives inherit – children, parents, siblings – and the person they shared their life with receives nothing. Anyone who wants to benefit their partner must actively arrange this, by will or inheritance contract – and will run into the compulsory portion (Pflichtteil) reserved for descendants. On top of that comes inheritance tax: spouses are largely exempt across the cantons, while non-relatives pay the highest rates in many places. The very same assets that would pass to a spouse tax-free can be taxed substantially when passing to a cohabiting partner.

State pension (AHV): No survivor's pension for the partner

The AHV provides widow's and widower's pensions – for married couples. A surviving cohabiting partner has no entitlement, regardless of how long the couple lived together. Conversely, cohabiting couples benefit elsewhere: their old-age pensions are not capped, whereas a married couple together receives at most 150 percent of the maximum pension.

Pension fund: Possible, but not automatic

Many pension funds provide for a domestic partner's pension – but as a benefit set out in the fund's own regulations, not as a statutory entitlement. The regulations often require a minimum duration of the shared household and, in some cases, a beneficiary designation or notification made during the person's lifetime. Anyone who wants to rely on this must know their own fund's regulations and have actually taken the necessary steps – after death, nothing can be made up.

Taxes: The balance tips depending on the situation

When it comes to ongoing taxes, neither form has a blanket advantage: married couples are assessed jointly, which turns out more or less favorable than two separate assessments depending on how income is distributed. When it comes to inheritance and survivor benefits, however, marriage is almost always the better-protected form – but in return it brings its own rules under matrimonial property law, which do not exist in cohabitation.

The difference shows up over time

Whether and how much these differences matter depends on the specific household: on the incomes, the assets, the children, the canton of residence – and on which of the two cases occurs that nobody likes to think about. In Wealth4Life, the same household can be modeled as a married couple and as a cohabiting couple, including a death scenario: with pensions, succession and taxes, year by year. What was a vague "we should really look into that" then becomes a concrete number – and, where needed, the number becomes an action item: a will, a beneficiary designation, coverage.