For executives and senior professionals, whether in health, biotechnology, pharmaceuticals, construction or technology, Executive Share Schemes (ESS) can be one of the most valuable components of remuneration. Over time, these shares may evolve into a substantial portfolio, representing not only financial achievement but also the potential for a legacy.
Despite the importance of Executive Share Schemes (ESS) in executive remuneration, they’re frequently overlooked in estate planning. If life takes an unexpected turn, what becomes of your ESS? How are unvested shares handled? And what can you do now to ensure your ESS is transferred with clarity, intention, and minimal disruption?
This article marks the beginning of our ESS Legacy Series, created to help executives and professionals take a strategic and proactive approach to ESS planning. Through thoughtful financial structuring and long-term vision, ESS can become more than a reward, it can become a legacy that lasts well 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 could be 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 working 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 Executive Strategies | Information Hub for Executives & Senior Managers.
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’re an executive or professional holding ESS shares, now is the time to consider how they fit into your broader legacy and estate planning. Our team of financial advisers specialises in ESS strategy and legacy planning across industries from mining and resources to health, technology, and beyond.
We can help you structure your holdings, prepare your family, and coordinate with your broader estate plan, ensuring your ESS is protected and passed on with clarity and confidence. I invite you to give me a call on +61 (0) 7 3007 2080 or email contact@executivestrategies.com.au to request a call back.
James Marshall is a financial adviser and specialised ESS strategist. To learn more about James Marshall, visit this link.
Executive Strategies is a specialised information hub for executives and senior managers who may have founded their own business or who work for growing private, ASX listed companies or government businesses. Its purpose is to provide access to specialist advisers and information that addresses the often-complex issues affecting their personal prosperity.
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 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.
