Vest Definition and Legal Meaning
On this page, you'll find the legal definition and meaning of Vest, written in plain English, along with examples of how it is used.
What is Vest?
(v) Vesting is the process by which a right on any assets, income or receivable is transferred to another person unconditionally. By vesting the property the ownership is transferred to the new person. Vested person can draw benefit from the right or property
History and Meaning of Vest
The term "vest" is commonly used in legal contexts to refer to the transfer of property or assets to someone else, usually with specific conditions attached. Vesting happens when a trust fund, pension plan, or other similar account becomes fully owned by an individual. It is also known as "absolute ownership," meaning the new owner has complete control.
Vesting is typically used in employment or pension contexts, where an employee receives shares or stock options as a part of their compensation package. These shares or options are "vested" over time, meaning the employee cannot exercise them all at once but must wait for a set period. This period is usually determined by the employment contract or the company's compensation policy.
Examples of Vest
John's company offers him 1,000 shares of stock as part of his compensation package, which will vest after three years of employment.
Sarah's 401(k) plan is fully vested, so she has complete ownership of the funds in the account.
After working at the law firm for ten years, Mary's pension is now fully vested, meaning she has the right to the full amount of benefits.
Legal Terms Similar to Vest
Stock option - an agreement between a company and an employee that grants the employee the right to buy company stock at a specific price for a set period.
Beneficiary - a person named in a legal document (such as a will or trust) who will receive assets or property upon the death of the owner.
Trust - a legal arrangement where a third party holds and manages assets or property for the benefit of another person or group.