What is a Vested Interest?

A vested interest is a right of ownership which is not dependent on something else.

How Does a Vested Interest Work?

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 Does a Vested Interest Matter?

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.

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Paul Tracy
Paul Tracy

Paul has been a respected figure in the financial markets for more than two decades. Prior to starting InvestingAnswers, Paul founded and managed one of the most influential investment research firms in America, with more than 3 million monthly readers.

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