Legal Definitions - Vest

To vest means that a right, ownership, or interest in something, often property or a benefit, becomes fixed, absolute, and legally enforceable. Once a right has vested, it cannot be taken away or made contingent on future events, even if the actual enjoyment or possession of that right is delayed until a later time.

• Example 1: Retirement Plan Benefits

  Imagine an employee who participates in a company-sponsored retirement plan. The plan states that an employee's right to the employer's contributions will "vest" after three years of continuous employment. This means that once the employee completes three years, their right to those employer contributions becomes permanent and non-forfeitable. Even if they leave the company after five years, they are guaranteed to receive those funds (and any earnings they've accumulated) when they reach retirement age, because their right to them has vested.

• Example 2: Inheritance of Property

  Consider a will that specifies that upon the death of a parent, their child immediately inherits ownership of their family home. The child's right to the home vests at the moment of the parent's death. While there might be legal processes like probate that need to be completed before the child can physically move in or sell the property, their legal ownership interest is established and certain from that point onward. The right to the property is no longer contingent on any future event.

• Example 3: Stock Options for Employees

  A technology startup might grant an employee stock options that "vest" over a four-year period, with 25% of the options vesting each year. This means that after the first year, the employee gains a fixed right to purchase 25% of the total granted shares at a predetermined price. After the second year, another 25% vests, and so on. Each time a portion of the options vests, the employee's right to buy those specific shares becomes secured and cannot be revoked, even if they later leave the company. Before vesting, the right is contingent on continued employment; once vested, it's a permanent right.