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An ESOP is an option to purchase company shares at a pre-agreed strike price, granted by the employer as part of compensation. Options vest over time — typically a 4-year schedule with a 1-year cliff.
An RSU is a promise to grant company shares at a future vesting date. RSUs vest similarly and, upon vesting, become actual shareholdings.
For Indian employees at Indian companies, ESOPs are typically in the employer company (or its parent). For Indian employees at multinational companies, ESOPs/RSUs are typically in the foreign parent (e.g., Nasdaq-listed US parent for Indian tech employees).
Combined, ESOPs/RSUs can be worth crores at senior employees at successful companies.
Every ESOP/RSU plan has specific provisions about what happens on the option holder's death. There is no universal Indian rule — you must read your plan document.
Common provisions on death:
Vested options: typically transferable to your estate or nominee. May need to be exercised within a limited window post-death (30-90 days).
Unvested options: typically lapse. But some plans include 'accelerated vesting on death' provisions that vest all outstanding options.
RSUs pending vesting: typically forfeited. Some plans include 'accelerated vesting' similar to ESOPs.
For vested options that must be exercised post-death, the exercise window matters. Common: 30 days, 90 days, or 12 months from date of death.
The exercise requires: (a) valid legal representative (executor with probate, or heir with succession certificate), (b) payment of the exercise price, (c) documentation acceptable to the employer.
If the exercise window expires before your family can complete the paperwork, the options lapse. This is one of the most common ways ESOPs are lost by families of deceased employees.
Include an inventory of your ESOPs/RSUs: employer, plan name, grant date, number of options/RSUs, vesting schedule, strike price. Update annually.
Attach the plan documents to your Will (or store separately and reference from the Will).
Name a specific beneficiary for the ESOPs, or direct them to fall into the residuary. If your family may not be sophisticated about exercising options, name an executor with equity experience to handle this.
Consider term insurance covering the exercise price of your vested options. A term-insurance payout can fund the exercise so your family does not need to come up with strike-price cash.
For Indian employees with US, UK, or other foreign parent ESOPs/RSUs, cross-border succession applies.
The foreign parent's plan document controls the transfer mechanics. Your Indian Will may not be directly recognised by the US or UK plan administrator — probate in the parent's jurisdiction may be required.
Consult an advocate familiar with cross-border succession for substantial foreign ESOPs. This is NRI Will (₹50,000) territory.
India has no inheritance tax. Inheriting ESOPs from a deceased Indian employee triggers no immediate tax.
When the beneficiary subsequently sells the shares (after exercising the options, if applicable), capital gains tax applies. The cost basis is either the exercise price or the FMV at the date of transfer, depending on specifics.
For US-listed shares inherited from a deceased Indian employee, US federal estate tax may apply if the deceased was a US person for tax purposes. For Indian employees who are not US persons, generally no US tax.
Your family may not know about your ESOPs, especially if you have not discussed the plan in detail. Include an ESOP briefing in your estate documents — a letter to your executor explaining what to do.
Provide contact information for your employer's ESOP administrator or HR business partner. Instruct your executor to reach out immediately post-death to understand the exercise window and required documentation.
For substantial ESOP portfolios, brief a trusted family member during your lifetime on how to handle exercise, potential sale, and coordination with the Will.
Read your ESOP/RSU plan document today. Understand the on-death provisions.
Update your Will to reference your ESOP holdings and direct their disposition.
For senior employees with substantial ESOP value, consider the Personalised Will (₹25,000) tier for proper coordination.
Review annually as your ESOP portfolio grows and vests.
This is general legal information, not legal advice. For your specific situation, consult a Law Tarazoo advocate.
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