Vested Interest

What It Is:

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

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.