For mining and resources executives, Executive Share Schemes (ESS) are often one of the most valuable components of their remuneration. Over time, these shares can grow into a substantial portfolio – one that reflects not just financial achievement, but the potential for a lasting legacy.
Yet, despite their significance, ESS holdings are often left out of estate planning conversations. What happens if something unexpected occurs? How are unvested shares treated? And what steps can be taken now to ensure your ESS is passed on with clarity, purpose, and minimal disruption?
This article launches our new ESS Legacy Series, designed to help executives and their families take a proactive approach to ESS planning. We’ll explore how financial structuring, and strategic foresight can turn ESS into a legacy that endures beyond the vesting date.
Why ESS Needs to Be Part of Your Estate Plan
ESS shares are often treated as a reward for performance, a long-term incentive, or a strategic wealth-building tool. But they are also an asset, one that may be held in your personal name, a trust, or even within a superannuation structure. Like any asset, they need to be considered in your estate plan.
Many executives mistakenly believe ESS shares are taxed when sold. Australian tax law generally treats the vesting date as the taxing point. If shares are sold within 30 days of vesting, the full sale amount is taxed as income. If sold after 30 days, only the value at vesting is taxed as income, and any gain (or loss) beyond that is subject to capital gains tax. This distinction can significantly affect estate planning, especially when timing the transfer or sale of shares to beneficiaries. For an overview of navigating employee share schemes and how vesting conditions can impact ESS outcomes, see our practical guide to employee share schemes here.
If you were to pass away while holding ESS shares, your beneficiaries may inherit them. However, the process is not always straightforward. Some shares may still be subject to vesting conditions and therefore have income tax implications for the estate (and subject to a reduction in shares, depending on the specific plan rules). Others may be held in structures that require legal or administrative steps to transfer or sell. And in many cases, the value of the shares may be significant enough to trigger tax consequences or affect the distribution of your estate.
A financial adviser who specialises in ESS can help you assess the current structure of your holdings, understand the implications of vesting and ownership, and build a plan that ensures your wishes are carried out with minimal disruption.
Structuring ESS for Intergenerational Wealth
One of the most effective ways to protect the legacy of your ESS is through strategic structuring. This might involve holding shares in a family trust, where income can be distributed to beneficiaries in a tax-effective way. Or it might mean transferring vested shares into superannuation, where they can be managed within a lower-tax environment and potentially passed on to beneficiaries more tax effectively.
These structures need to be considered in light of the rules surrounding share ownership, particularly if you are a senior executive with minimum shareholding requirements. Some companies allow shares held in the name of your spouse, trust, super fund, or related entity as counting toward your minimum shareholding requirement, but others do not.
Each structure has its own advantages and limitations. For example, a trust offers flexibility and control but may require ongoing administration. Superannuation might provide greater tax efficiency, but access to capital may be limited depending on your age and retirement status.
The key is to align your ESS structure with your broader financial goals. Are you planning to retire soon? Do you want to provide for children or grandchildren? Are you concerned about asset protection or liquidity? These questions are best answered in partnership with a financial adviser who understands both ESS and estate planning.
Preparing Your Family for the Future
Legacy planning isn’t just about documents and structures, it’s about people. If your family is unaware of your ESS holdings, or unsure how to manage them, they may face confusion or stress during an already difficult time.
We recommend having a conversation with your loved ones about your ESS. Let them know where the shares are held, what conditions may apply, and who they can contact for support. Consider preparing a legacy folder that includes:
- A summary of your ESS holdings
- Vesting schedules and grant documentation and tax statements
- Contact details for your financial adviser, accountant, and legal representative
- Instructions for accessing share registries or scheme administrators
This kind of preparation can make a world of difference. It ensures your family is informed, empowered, and supported, and it helps preserve the value of your ESS for future generations.
Coordinating Across Disciplines
ESS legacy planning is not a solo effort. It requires coordination between financial planners, accountants, and legal advisers. At Resources Unearthed, we take an integrated approach. Our financial planning team works closely with tax and legal professionals to ensure your ESS is managed holistically, from accumulation to succession.
This collaboration means your estate plan reflects the full complexity of your ESS. It accounts for vesting conditions, tax implications, and legal ownership. And it ensures that your legacy is protected, not just in theory, but in practice.
Learn more about our integrated services at https://www.resourcesunearthed.com.au
What’s Next in the Series?
In our next article, our accounting contributor explores the tax implications of inherited shares, whether they’re part of an Executive Share Scheme (ESS), a personal investment portfolio, or employer-issued equity. We’ll look at how these assets are treated under Australian tax law, what executors and beneficiaries need to know, and how to avoid common pitfalls in reporting and compliance.
This tax perspective is essential for understanding the financial impact of share inheritance and for ensuring your legacy is passed on with clarity and confidence.
Let’s Future-Proof Your ESS Legacy
If you hold shares and want to ensure they are protected for the future, we’re here to help. Our team of financial advisers specialises in ESS strategy and legacy planning. We can help you structure your holdings, prepare your family, and coordinate with your broader estate plan.
For more information, please contact James Marshall for a 20-minute, no-obligation discussion. You can call James at +61 (0) 7 3007 2000 or email contact@resourcesunearthed.com.au.
To learn more about James, visit this link.
Further Reading:
Unlock the full potential of your Executive Share Scheme (ESS) with our newly updated strategy paper – What You Need to Know About Executive Share Schemes – crafted specifically for mining and resources professionals. Download HERE.
Resources Unearthed is a solutions hub that connects senior executives, established professionals, and business owners in mining and resources with proven specialist advisers.
Stratus Financial Group and its advisers are Authorised Representatives of Fortnum Private Wealth ABN 54 139 889 535 AFSL 357306. This advice is general and does not take into account your objectives, financial situation, or needs. You should not act on it without first obtaining professional financial advice specific to your circumstances.
*Please note: For financial advice and services relating to this matter that are not offered under the Fortnum Private Wealth AFSL, in accordance with our collaborative advice model, when required, such matters are referred to appropriately qualified professionals.
