The house is to go to the children. Right of residence or usufruct?

Both rights let a person go on living in the house, even once the children are the registered owners. The difference shows once that person moves out, say into care. A usufruct (Nutzniessung) gives the right to all proceeds, above all rent¹. A right of residence (Wohnrecht) only gives the right to live there².

This difference over proceeds is the key point. The exercise of a usufruct may be left to someone else, unless the contract makes it strictly personal³. Its holder may let the house and keep the rent. A plain right of residence cannot be transferred or inherited⁴.

Both rights arise once entered in the land register. They need the same form as buying a house, a deed drawn up by a notary⁵. Both end at the latest on the holder's death⁴.

What this means for you: usufruct fits better if your parents want to keep the option of letting the house. A right of residence often suffices if living there is enough.

Whoever lives in the house pays tax on its imputed rental value (Eigenmietwert), the notional rent it would otherwise earn. This applies even once the parents are no longer owners, only holders of an unpaid right of use⁶. The child as new owner does not pay this tax.

This rule applies until the end of 2028. The Federal Council brings the reform of home-ownership taxation into force on 1 January 2029⁷. After that, this tax falls away for self-occupied homes, along with the upkeep deduction. For a let property, the deduction stays.

If the parents let the house instead of living in it, the rent counts as their taxable income, not the child's⁶. That only applies under a usufruct. A plain right of residence does not allow letting at all.

What this means for you: the parents keep paying ordinary upkeep themselves. Under a usufruct, mortgage interest is added to that. Larger repairs, by contrast, are paid by the child as owner, since the house belongs to them.

In Zurich, handing the house to your children is usually free of gift tax. A spouse, a registered partner or a descendant is exempt from this tax⁸. Zurich gift tax applies when property located there, or rights to it, change hands¹⁵ – your own children stay exempt.

What is transferred still matters for the valuation. If the parents keep a usufruct, its capital value is deducted from the transfer. The law caps this value at three quarters of market value⁹. That mainly affects cases where a non-exempt person receives the gift, say a step-child.

With more than one child, a second point matters. An advance on inheritance (Erbvorbezug) is a lifetime payment set off against the later estate, unless ruled otherwise¹⁰. That also applies to a house with a reserved right of residence, should a joint heirs' estate form later.

What this means for you: record how the siblings are equalised. The notary can work out the exact capital value together with the tax office.

A right of residence or a usufruct does not disappear just because the house is sold. The right stays in the land register until the holder dies or waives it. After death, there is only a claim to have the entry deleted; the deletion itself still has to be arranged⁴.

If the house is to be sold later, say when the parents move into care, deleting the right needs their consent while they live. Without that consent, a buyer would have to take the right on. That makes a house less attractive to many buyers.

What such a right does to the sale price is not officially quantified anywhere. Only the capital value for tax purposes is documented, not a discount on the open market. That can only be judged case by case.

What this means for you: plan for a possible later sale already in the transfer contract. Record the conditions under which the parents agree to delete the right, and whether they receive compensation for it.

If the parents move into care, the right continues unless they expressly waive it. For supplementary benefits (Ergänzungsleistungen), the state top-up in old age, the annual value of a right of residence or a usufruct counts as income¹³.

While the parents live at home, the rental value is also recognised as housing costs, plus a flat allowance for running costs¹⁴. In a care home, the home’s fees count instead. If the parents waive their right without payment, that changes nothing for the calculation. Without an equivalent payment in return, it is treated as if they had never waived it¹³.

Even handing the house to the children without an equivalent payment in return can count as a waiver of assets¹³. How far a reserved right reduces this amount must be clarified case by case. More under care in later life.

What this means for you: check with your municipality’s supplementary benefits office or a specialist how a possible waiver would later be counted. Then the parents know where they stand.