In law, vesting is the point in time when the rights and interests arising from legal ownership of a property are acquired by some person.
This is generally done to obviate disputes over the precise time of death, and to avoid paying taxes twice in rapid succession should multiple members of a family die in the wake of a disaster.
This may happen with entailed estates, or when property is left in trust to care for a child or relative without heirs.
Once a retirement plan is fully vested, the employee has an absolute right to the entire amount of money in the account.
[3] Generally, for retirement plans in the United States, employees are fully vested in their own salary deferral contributions upon inception.
To make the reward commensurate with the extent of contribution, encourage loyalty, and avoid spreading ownership widely among former participants, these grants are usually subject to vesting arrangements.
The grantee receives an option to purchase a block of common stock, typically on commencement of employment, which vests over time.
The company retains a repurchase right to buy the stock back at the same price should the employee leave.
Profit-sharing plans are usually vested in ten years, although in some cases a plan may serve essentially as a pension by allowing a limited amount of vesting should the employee retire or leave on good terms after an extended period of employment.
The vested rights doctrine is the rule of zoning law by which an owner or developer is entitled to proceed in accordance with the prior zoning provision where there has been a substantial change of position, expenditures, or incurrence of obligations made in good faith by an innocent party under a building permit or in reliance upon the probability of its issuance.
Less commonly, the vesting schedule may call for variable grants or subject to conditions such as reaching milestones or employee performance.