What it is:
How it works/Example:
When a possession, ownership interest or the use of tangible property is present and unencumbered by any conditions, it is known as a vested interest. The clear and unencumbered interest is not reliant or contingent on anything other conditions or events. For example, a vested interest can mean stock or options that are transferred and available to the recipient. A vested interest in real estate means the owner of the property. A vested interest in a pension plan, for example, may mean that the employee is qualified to take the benefits of the pension plan, including the contributions by the employer.
Why it matters:
A vested interest in tangible property represents an important asset on a company's or personal balance sheet. Understanding the conditions of a potential borrower's vestment (i.e. establishing a vested interest) in a particular asset is an important part of the due diligence process for a creditor.