For mining and resources executives, shareholdings, including Executive Share Schemes (ESS) and other equity investments are more than just a reward for service. They’re legal assets that must be carefully managed in estate planning. These shares often reflect years of performance and strategic value, yet their treatment upon death is frequently misunderstood.
Can shares, whether ESS or otherwise, be transferred to beneficiaries? What happens to unvested ESS shares? And what legal steps must executors take to ensure compliance and protect the estate?
In this final article of our ESS Legacy Series, we examine the legal considerations that apply when shares form part of a deceased estate. Whether you’re planning ahead or managing a loved one’s affairs, understanding the legal framework is key to preserving value and avoiding complications.
Legal Ownership and Transfer of Shares (Including ESS)
The first legal question is whether the ESS shares are vested or unvested at the time of death. Vested shares are typically considered part of the estate and can be transferred to beneficiaries. Unvested shares, however, may be subject to scheme rules that limit or prevent transfer. Some schemes include clauses that proportionally vest upon death, while others may upon death of the intended recipient cancel the unvested shares entirely.
It is important to review the specific terms of your ESS agreement. The terms will outline the conditions under which shares vest, the rights of the holder, and any restrictions on transfer. If the scheme allows for proportional vesting, the shares may become part of the estate and be distributed according to the will. If not, they may be forfeited, leaving beneficiaries without access to those shares.
Executors should contact the employer or scheme administrator to request copies of plan rules and statements of holdings. This will help determine which shares are eligible for transfer and what legal steps are required to facilitate that transfer.
The Role of the Executor
Executors have a legal duty to identify all assets of the estate, including ESS shares. They must determine the vesting status, confirm ownership, and ensure the shares are included in the estate inventory. If the shares are held in a trust or SMSF, additional steps may be required to access or transfer them in consideration of the broader estate plan.
In some cases, the executor may need to apply for probate before the shares can be transferred. This is especially true if the shares are held in the deceased’s personal name and the value exceeds the threshold for informal administration. Once probate is granted, the executor can work with the scheme administrator to transfer the shares to the beneficiaries or sell them on behalf of the estate.
Legal advice is recommended during this process, particularly if the ESS agreement includes complex conditions or if the estate involves multiple jurisdictions. Tax and financial advice should also be sought.
What Happens to Unvested Shares?
Unvested shares present a unique legal challenge. These shares are typically subject to performance or time-based conditions and may not be considered part of the estate until they vest. If the scheme includes a clause for proportional vesting upon death, the shares may vest and become transferable. If not, they may be forfeited.
Executives should review their ESS agreements and consider whether the scheme provides flexibility in the event of death.
Beneficiaries should be aware that unvested shares may not be accessible, and legal advice may be needed to determine whether any action can be taken.
Including ESS in Your Will and Estate Plan
To ensure ESS shares are dealt with properly, they should be considered when documenting your Will and estate plan. This includes specifying who should receive the shares, how they should be managed and including what steps the executor should take to access those shares would help immensely in the administration of your estate.
If the shares are held in a trust or SMSF, the estate plan should include instructions for the trustee or fund administrator. Binding death benefit nominations may be required to ensure the shares are transferred according to your wishes.
Legal advisers can help draft these documents and coordinate with your financial planner and accountant to ensure your ESS is integrated into your broader legacy strategy.
Planning Ahead to Avoid Legal Complications
The best way to protect your ESS legacy is to plan ahead. This includes reviewing your ESS agreements, updating your will, and coordinating with your advisers. By taking these steps now, you can ensure your shares are transferred smoothly and your beneficiaries are supported.
Legal planning also helps avoid disputes, delays, and unnecessary costs. It provides clarity for your family and peace of mind for you.
At Resources Unearthed, we work with executives to build comprehensive estate plans that include ESS, superannuation, trusts, and other assets. Our legal team collaborates with financial and tax specialists to deliver integrated advice that reflects your values and goals.
Closing the Series: A Legacy Worth Protecting
This article concludes our ESS Legacy Series. We’ve explored how to plan for the future of your ESS shares from financial, tax, and legal perspectives. Together, these insights form a roadmap for protecting your legacy and ensuring your hard-earned wealth is passed on with clarity and confidence.
If you hold ESS shares or other equity investments and want to ensure they are included in your estate plan, we’re here to help. Our legal team can guide you through the process, review your agreements, and work with your advisers to build a strategy that reflects your wishes.
To arrange a time to meet with Robert Lamb please call 61 (0) 7 3007 2000 or email contact@resourcesunearthed.com.au
To learn more about Robert, visit this link.
Resources Unearthed is a solutions hub that provides integrated financial, legal, property, accounting and business advisory services for executives, professionals and business owners in the mining and resources sectors.
