Introduction

Where there is a will

Those appointed to manage the estate must apply to the Sheriff Court to obtain the necessary written authority to manage the estate. This is generally referred to as 'obtaining Confirmation'. The Court will issue a document, called 'Confirmation', which acts as proof of the person's authority to act.

If the will is valid and contains an effective appointment of executors of whom one or more is willing and able to act, they will be given the necessary authority to proceed with the management and administration of the estate. It is called a grant of Confirmation and will be issued to nominated executors.

If there is a valid will, but there are no persons willing or able to act as executors, then the Court has to be petitioned to have executors appointed.

Where there is no will

Where it is necessary to obtain Confirmation, the procedure will differ depending upon whether or not the value of the estate does not exceed the value of the spouse or civil partner's prior rights. If it does not, generally the spouse or civil partner will lodge a petition in the Sheriff Court to have him or herself appointed as Executor-Dative and, on the grant of that petition, will then proceed to apply for Confirmation in exactly the same way as if the deceased had left a will.

On the other hand, if the value of the estate exceeds the spouse and civil partner's prior rights or if there is no spouse or civil partner, the procedure is different. There are various stages in this different procedure:

Often only one person is appointed Executor-Dative, but it is possible to appoint more than one and, where the petitioner is elderly or infirm, it is wise to appoint more than one. This avoids the risk of a sole executor dying before completing the process of winding up the deceased's estate, leaving nobody to wind up the estate. Once appointed, an Executor-Dative is obliged to continue in office and may not resign, so it is important that if there are a number of people with equal rights to be appointed Executor-Dative, only the person or persons willing to see the administration of the estate through to the end are those who petition for appointment. Generally, the persons entitled to share in the deceased's estate or to the whole of the estate are those who are entitled to be appointed Executor-Dative. Read our law guide article on succession to identify who these people are.

Once the potential Executor-Dative has been ascertained, a petition has to be lodged in the correct form in the Sheriff Court. The petition must state the place where the deceased died, the date of death, and whether or not they died leaving a will. If they left a will, it must narrate details of the will. The petition must state why the petitioner is entitled to petition, where the deceased was domiciled at the date of death and the degree of relationship to the deceased which the petitioner alleges is adequate to entitle him or her to be appointed as executor. It has to be signed by the petitioner or by his or her solicitor. When lodged with the Court, it has to be accompanied by the fee of £15 and a duplicate of the petition for exhibition on the walls of Court. The Sheriff Clerk on processing the petition will post the duplicate on the walls of the Sheriff Court and, for a period of 21 days thereafter, anybody wanting to object to the petition can do so. Failing that, decree is normally granted as a matter of course.

Preliminary steps

Details of assets and liabilities

An executor must first obtain details of the deceased's property and of any debts outstanding at the date of death. This can be achieved by obtaining the building society passbooks, share certificates and details of bank accounts. These documents will give some indication of the value of the assets but are unlikely to produce precise values. More accurate valuations ought to be obtained by writing to the various institutions holding the deceased's assets and producing the death certificate as evidence of the death where required.

The executors should also ask the bank whether it holds in safe custody any share certificates or other property owned by the deceased. The bank will require sight of the death certificate. Once these details have been gathered, the executors will then have some idea of the size of the estate. This is extremely important, particularly where the estate will be subject to Inheritance Tax.

Details of the beneficiaries

The identity of the beneficiaries should be obtained at an early stage. The nature of their entitlement should also be identified, for example, whether they are receiving a specific gift or part of the residue (what is left over). If they are receiving specific gifts, it is important to establish whether the property given by those specific gifts is part of the estate. If it is not, the gift will fail, except in very unusual cases.

If the deceased dies intestate (without having made a valid will - see 'Dying without a will'), it is necessary to establish which members of the family have survived so that the basis of distribution of the estate can be established in accordance with the intestacy rules.

Missing or unknown beneficiaries

Executors are responsible for the administration of the deceased's estate. This function must be performed correctly. Failure by an executor to carry out their duties can give rise to personal liability. Executors may be faced with a problem that persons entitled under the will or intestacy rules have disappeared or are unknown to them. In addition, the executors may not be sure that they have identified all the deceased's debts and creditors. Steps can be taken to protect the executors. Advertising might be prudent and a missing beneficiary insurance policy may be obtained.

Applying for a Bond of Caution (pronounced "Kayshun")

Where somebody has died intestate, before an application can be lodged for Confirmation, unless the Executor-Dative is the surviving spouse or civil partner and his or her prior rights have a value equal to or more than the value of the entire intestate estate, it is necessary for an Executor-Dative to obtain a Bond of Caution (pronounced "Kayshun") from an insurance company. There are a limited number of insurance companies prepared to provide these Bonds. In the Bond of Caution, the insurance company guarantees that the Executor will wind up the estate according to law and the Executor guarantees to the insurance company that they will indemnify the insurance company in the event that there is a call on the Bond.

An application for a Bond of Caution involves completing a proposal form on which has to be narrated the details of the deceased's estate, those who are entitled to share in the estate, and other information about who is winding up the estate. Along with the proposal form goes the Bond itself signed by the Executor and a copy of the inventory of the estate which it is proposed will be lodged with the Sheriff Clerk to obtain Confirmation once the Bond of Caution has been granted. The premium charged by the insurance company will differ, depending upon the value of the estate, but it is generally at least £300.

Once the Bond of Caution is obtained, the winding up of the estate can proceed in the same manner as if the deceased had left a will except that the Bond of Caution is lodged with the Sheriff Clerk at the same time as the Inventory (C1) form. During the course of administration of the estate, the insurance company will want to be advised and they will also have to be kept informed when the estate is disbursed, as the insurance company will require to be satisfied that the proper recipients have received their shares of the estate.

The Confirmation papers

The appropriate forms must be prepared in readiness for the application for Confirmation. All assets must be valued in accordance with the Inheritance Tax valuation principles. The values and amounts of any debts and liabilities due at death will be inserted into the appropriate tax form or estate information provided with the confirmation application.

The amount of Inheritance Tax payable before the application for Confirmation is made can be calculated. Arrangements may have to be made for loan facilities with the bank so that this amount can be borrowed since, generally, the deceased's assets will not be available to the Executors until Confirmation has been obtained. If, however, the deceased held assets in Banks, Building Societies, Government Stocks or National Savings, it is usually possible to have the Inheritance Tax paid directly by the appropriate institution to HMRC which may reduce or eliminate the need for a loan to pay the tax.

Procedure

In the case of the majority of applications made through solicitors, the main stages involved are:

• The solicitor meets the client and takes necessary details or the client supplies information
• The solicitor writes to the various asset holding institutions and valuers to obtain values for the estate
• The solicitor prepares the inventory and forms for the client to sign the declaration (see below)
• The client signs the declaration
• The solicitor then sends the Inventory (C1) and Inheritance Tax forms (IHT400 and supporting documents) to HMRC with a cheque or other means of payment in settlement of the tax in taxable cases
• The solicitor then sends the papers to the Sheriff Clerk's office, for processing together with the original will (if there is one), fee and form C5 if the death occurred on or before 31 December 2021 (see GOV.UK), in a case where there is no IHT to pay)
• Staff at the Sheriff Court examine the papers, and Confirmation is issued and sent to the solicitor once the Court is satisfied as to the validity of the application

If the deceased's estate is worth less than £36,000 before debts are deducted it is called a 'small estate'. The Sheriff Clerk of the court will help prepare the necessary forms to apply for Confirmation. Details are available on the Scottish Courts Administration website.

Tax forms

One of the first steps towards obtaining Confirmation is preparation of the appropriate tax form and calculation of any Inheritance Tax (IHT) payable.

For excepted estates, where the person died on or after 1 January 2022, a tax form may not need to be completed. You may only be required to provide estate information as part of the confirmation application - see GOV.UK.

Purpose of the tax forms (where required)

The tax form is an inventory of the assets to which the deceased was beneficially entitled, and of their liabilities. It is also a form for claiming reliefs and exemptions and calculating the IHT payable. It should be delivered within twelve months after the death of the deceased. Penalties may be levied if the form is lodged after that date. Usually the Executors will aim to deliver the account within six months to avoid interest being charged. Until the account is submitted, no Confirmation can be issued.

IHT is payable on all property to which the deceased was entitled immediately before death. Certain types of property qualify for tax relief, for example a business or UK agricultural property. In respect of other property an exemption may apply. Two of the most important exemptions are benefits left to the surviving spouse/civil partner or to a charity. In both cases, no IHT is payable.

The tax forms divide the deceased's assets into property with, and without an instalment option. IHT payable on property without the right to pay by instalments must be paid within six months of the end of the month in which the death occurred.

HMRC allows payment on land, businesses and certain shares to be paid by way of ten equal yearly instalments. If the option is exercised, only the first instalment of one tenth must be paid within six months following death. In an estate where it is not possible to deliver the tax form within that period, then all tax on non-instalment option property plus the appropriate number of instalments on property with the option and interest must be paid on delivery of the account. Interest runs on all tax not paid on the due date.

Valuations

Assets and liabilities are valued in accordance with specific principles. For example, quoted shares are valued at a quarter up on the lower of the two prices quoted on the stock exchange for the date of death (i.e. the lower price plus one quarter of the difference between the lower price and the higher price). Unquoted shares are usually valued initially by the company's accountants before the values are ultimately negotiated with the share valuation division of HMRC.

Liquid assets such as bank accounts are valued as the amounts standing to the credit of the deceased at the date of death together with interest accrued but not credited. Life policies are shown as their maturity value.

Land is valued at its open market value as at the date of death. This is usually ascertained from a Chartered Surveyor employed by the executors but, before winding up of the estate can be completed, the valuation must be agreed with the local District Valuer after negotiation.

Special valuation rules apply where the deceased was a co-owner rather than a sole owner of the land.

Where there is joint ownership of land (other than with a spouse or civil partner), the market value of the land at the date of death may be discounted to reflect the virtual impossibility of selling a part interest in the property. A discount of 10% to 15% is normally considered reasonable. This special valuation rule does not apply to assets other than land.

Funding the IHT

Where there is IHT to pay on delivery of the tax form, the Executors must arrange for the appropriate amount of money to be sent to HMRC with the form. Until this tax is paid, the Confirmation cannot be obtained and therefore the executors will not be in a position to start to collect in the estate.

However, the estate may not have sufficient cash assets to cover the IHT payable. Often the deceased has invested in land, shares and other investments leaving very little in cash. There are a number of options available to the Executors:

• If there is sufficient cash in a building society account or there is a policy of insurance on the deceased's life, the institution holding the funds may be willing to release funds to pay the IHT.
• In terms of the Administration of Estates (Small Payments) Act 1965 the Executors may be able to obtain one particular asset where the maximum value is not more than £5,000.
• If the beneficiaries are wealthy, they may be prepared to fund the IHT from their own resources, as they will ultimately be repaid from the deceased's estate once the confirmation issues. Alternatively, beneficiaries may have already received assets as a result of the death, which they are prepared to use to pay the tax. These assets include money from a jointly held bank account or the proceeds of a life policy that was vested in the beneficiary.
• Where there is insufficient cash available, banks will be prepared to enter into a loan for payment of the IHT. However, they will require undertakings from the Executors. Bank borrowing is expensive, as the bank will charge an arrangement fee and interest on the amount borrowed. Money borrowed should be repaid at the earliest opportunity so as to honour any undertaking and to stop interest running. Income tax relief is available on interest paid on a separate loan account.
• Payment of tax may also be made from National Savings Bank accounts or from the proceeds of National Savings Certificates, Deposit or Income Bonds, Premium Bonds and similar holdings. However, this could cause delays of up to four weeks before the monies are available for payment of tax.

Requirement for a tax return

Depending on the nature of the estate, different IHT forms are available. The most commonly used forms are the IHT Form C5 (where no tax is payable) and IHT Form 400 (where tax is payable). For deaths on or after 1 January 2022, a tax form may not be required at all.

Necessity for Confirmation

Confirmation enables the Executors to prove their authority to deal with the deceased's property that passed under the will or the intestacy rules (see 'Dying without a will'). However, it should not be presumed that it is always necessary to obtain Confirmation. The ability to cash the assets without the production of Confirmation is particularly useful where the deceased's family needs funds immediately for payment of Inheritance Tax or other purposes. In most cases, however, if IHT is due on an estate, it will be too large to wind up without obtaining Confirmation.

Assets which may pass without Confirmation

Where the assets in the estate are of such a type that they may be cashed without the production of Confirmation, or the assets do not pass through the hands of the Executors or the assets to be cashed do not form part of the deceased's estate, Confirmation may not be required.

Payments can be made to persons appearing to be beneficially entitled to the assets without formal proof of title. This facility is restricted in that it is not available if the value of the asset exceeds a certain sum which varies between institutions but is generally £5,000 or more. The payments are usually made at the discretion of the institutions concerned. It is not possible for the executors to insist that payments should be made.

Subject to these points, payments can be made in respect of, for example, money in National Savings Bank accounts, National Savings Certificates, Premium Bonds, and money in Building Societies and friendly societies.

Recoverable property such as furniture, clothing, jewellery and cars can normally be sold without the Executors having to prove to the buyer that they are entitled to sell such items. Occasionally, Confirmation will be required to prove entitlement, for example, if the deceased's jewellery is deposited at a bank.

Normally the Executors do not require Confirmation before taking custody of any cash funds in the deceased's possession as opposed to funds deposited in a bank or other account.

Assets not passing through the Executor's hands

On death, any interest in property held by the deceased on a joint and survivor basis with another (whether it is an interest in land or for example, a bank account) passes by survivorship to the survivor. As it does not pass via the Executors, Confirmation is irrelevant.

The survivor has access to the property and can prove title to the whole of it merely by producing the deceased's death certificate. Since it is common for married couples or civil partners to own property jointly with a survivorship destination in the title, there are many occasions where Confirmation is not required for this reason. The property passes automatically to the surviving spouse/civil partner.

Property not forming part of the estate

Where the deceased insures their own life so that the policy and its proceeds are held in trust for another, Confirmation is not required. On the death of the deceased the policy money is payable to the trustees of the policy on production of the death certificate and the proceeds do not form part of the deceased's estate.

As the deceased had no beneficial interest in the policy or its proceeds, no Inheritance Tax will be payable on the proceeds. Such a policy is particularly advantageous as the proceeds make tax-free provision for dependants of the deceased and can be collected immediately following death. (If premiums have been paid in the seven years prior to death, however, there may be inheritance tax implications in taxable estates.)

If the deceased has entered into a discretionary scheme such as a pension fund, then any payments made by the pension fund trustees are made to the beneficiaries on production of the death certificate. Once again, Confirmation is not required since the pension benefits do not form part of the deceased's estate. It is another method of making tax-free provision for the dependants, and such provision can be collected immediately following the death.

Post death changes

A person is entitled either to reject a gift outright (disclaimer) or choose another beneficiary to receive the gift (variation) (see 'Changing the will after Death'). In both cases there will be a change to the beneficiary and this may also lead to a change in taxation.

If such action is to be taken it must be taken within two years of the death. However, it is advisable to consider the possibility of a variation or disclaimer at a much earlier stage, choosing to do so when the opportunity most naturally arises. If a variation or disclaimer is made before application for Confirmation, it is possible to pay Inheritance Tax (IHT) (if the estate is liable) on the basis of the variation or disclaimer being incorporated into the testator's (someone who makes a will) will or the intestacy rules (see 'Dying without a will').