What Is Vesting?
Vesting is a legal term which means to give or earn a right to a present or future payment, asset or benefit. It is most commonly used in reference to retirement plan benefits when an employee accrues non-forfeitable rights over employer-provided stock incentives or employer contributions made to the employee’s qualified retirement plan account or pension plan. It is also commonly used in inheritance law and real estate. Vesting means to get a right or give it to a present or future payment, asset or benefit.
One of the best benefits you can get from vesting is to get rights to employer-provided assets over time, which will surely be an incentive for any employee to work an extra harder in order to have a better retirement life one day.The company will set the non-forfeitable rights and determine when the employee earns those benefits. A major factor that will play in this decision will be how long the worker has been working for the company.
In the context of retirement plan benefits, vesting gives an employee rights to employer-provided assets over time, which gives the employee an incentive to perform well and remain with the company.
Types of Vesting
1- Tenancy in common
Tenancy in common is another way to hold title on a property, where each person involved owns a portion of the property. Upon the death of a tenant in common, his/her share will go to whom that person decided based on his/her will, or otherwise there would be an intestate succession.
2- Community Property with Right of Survivorship
Community property with right of survivorship ensures a surviving spouse receives the deceased spouse’s property share. Community property tenancy allows couples to own an undivided interest in the entire property. Spouses are not allowed to pass their property interest to someone other than their spouse in a will. This type of tenancy is restricted to married couples and registered domestic partners. Property will automatically pass to the surviving spouse without having to go through the probate process.
3- Joint tenancy
Joint tenancy is a type of co-ownership between two or more persons in which each person owns an undivided interest of the whole. Because joint tenancy creates a right of survivorship, upon death, a party’s share of property will pass to the remaining joint tenant. The surviving spouse will be left with 100% share of the property. Because the surviving spouse automatically receives the property, probate can be avoided (at least until the surviving owner passes away).