Learning Goals
Introduction to Family Governance
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401(K) - A company sponsored retirement account that employees can contribute to and employers may also make matching contributions. 401-K contributions are taxed when withdrawn.
529 PLAN - A tax-advantaged investment vehicle in the U.S. designed to encourage saving for the future higher education expenses of a designated beneficiary.
A-B TRUST - A trust that divides into two upon the death of the first spouse. Formed with each spouse placing assets in the trust and naming the beneficiary any person except the other spouse. It splits into two upon the first spouse's death – trust A or the survivor's trust, and trust B or the decedent's trust.
ABATEMENT - The reduction in assets transferring to a legatee because the estate has insufficient assets to satisfy all of the legatees.
ABC TRUST ARRANGEMENT - A common trust arrangement that utilizes a bypass trust (the B Trust), a GPOA Trust (the A Trust), and a QTIP Trust (the C Trust) to provide the necessary support to a surviving spouse while maximizing the use of the decedent’s applicable estate tax credit and providing the decedent the ability to determine the ultimate beneficiary of most of his assets at the death of the surviving spouse.
ABLE ACCOUNTS - Accounts for disabled individuals that provide some of the benefits of special needs trusts without the complexities typically associated with those trusts.
ACCELERATED DEATH BENEFIT - A reduced payment of the death benefit of a life insurance policy paid to the insured during the insured’s lifetime in return for a surrender of the life insurance contract.
ACCELERATED DEPRECIATION - Any method of depreciation used for accounting or income tax purposes that allows greater depreciation expenses in the early years of the life of an asset.
ACCREDITED HIGH-NET-WORTH INDIVIDUAL - In the U.S., one must have $1,000,000, excluding the value of one’s primary residence, or $200,000 income for the past two years ($300,000 if married) and expect this income to continue into the future.
ACCRUAL ACCOUNTING - An accounting method where revenue or expenses are recorded when a transaction occurs rather than when payment is received or made. The method follows the matching principle, which says that revenues and expenses should be recognized in the same period.
ACCUMULATED DEPRECIATION - The total amount a company depreciates its assets or the total amount of a company's cost that has been allocated to depreciation expense since the asset was put into use. A running total of depreciation expense reported on the balance sheet.
ACTIVE INCOME - A service is performed for a payment.
ACTUAL CONTRIBUTION RULE - The value of a decedent’s joint interest in property is based on the actual percentage of the original purchase price contributed by the decedent—-not the decedent’s ownership percentage.
ADEMPTION - Extinction of a legacy because an asset, specifically bequeathed to a legatee, has been disposed of prior to death.
ADJUSTABLE TAXABLE GIFT - The total amount of taxable gifts made by the decedent after 12/31/1976 other than those gifts that must be included in the gross estate.
ADJUSTED GROSS ESTATE - The adjusted gross estate is equal to the gross estate less any deductions for Funeral expenses, last medical expenses, administrative expenses, debts, and losses during the administration of the estate.
ADJUSTED GROSS INCOME (AGI) - Annual gross income minus certain adjustments that the IRS uses to determine a persons or companies income tax liability for the year.
ADMINISTRATION EXPENSES - All the expenses connected with settling an estate, including executor’s or administrator’s fees, attorney’s and accountant’s fees, court fees, and the expenses related to estate property
ADMINISTRATOR - A person, usually a relative of the deceased, appointed by the probate court to oversee the probate process when an executor is not named in the will.
ADVANCE HEALTHCARE DIRECTIVE - Legal document expressing an individual's last wishes regarding life-sustaining treatment.
ADVANCEMENT - An amount given to an heir by the deceased during his lifetime intended as an “advance” against the heir’s share under the will
ALTERNATE VALUATION DATE - An alternate date, other than the date of death, to value a decedent’s gross estate. The alternate valuation date is either six months after the date of death, or if the asset is disposed of within six months of the date of death, the asset’s disposition date. Wasting assets do not qualify to use the alternative valuation date.
ALTERNATIVE INVESTMENTS - A financial asset that does not fall into one of the conventional equity, income, cash categories. Examples include private equities, real property, hedge funds, and commodities.
AMERICAN TAXPAYER RELIEF ACT (ATRA 2012) - Tax act signed by President Barack Obama in January of 2012. The act reunified estate and gift tax with a $5,000,000 exemption and a 40 percent marginal rate (2013).
AMORTIZATION - Refers to the process of paying off debt over time in regular installments of interest and principal sufficient to repay the loan in full by its maturity date. The amount of principal due in a given month is the total monthly payment (a flat amount) minus the interest payment for that month.
ANCILLARY ADMINISTRATION - Additional probate proceedings that must be carried out when the deceased owned property in a state or states other than that where he had his principal residence
ANCILLARY PROBATE - A probate process conducted in a state other than the state of the decedent's domicile.
ANNUAL EXCLUSION - An exclusion from gift taxes for present interest transfers less than or equal to $14,000 per year per donee.
ANNUITY - Income paid in a series of payments.
ANNUITY GIFT - A pecuniary gift that is payable periodically.
APPLICABLE EXCLUSION AMOUNT - The total amount exempted from gift and/or estate tax.
APPLICABLE FEDERAL RATE (AFR) - The minimum interest rate you must charge on a loan in order for it to be considered fair market rate for the loan to be considered a taxable event and not a gift by the IRS.
APPLICABLE RATE - The maximum estate tax rate in effect at the date of the GST multiplied by the inclusion ratio.
APPOINTMENT OF EXECUTOR CLAUSE - A clause in a will that identifies the executor and any successor executor. This clause may also define the extent of the executor's powers and may grant specific or general powers.
ARM’S-LENGTH TRANSACTION - A transfer generally between unrelated parties in the form of a sale, an installment sale, or an exchange.
ASCERTAINABLE STANDARD - An objective standard for allowing distributions defined in the Internal Revenue Code as distributions for health, education, maintenance, or support (HEMS).
ASSET CLASSES - A group of financial instruments with similar characteristics and behaviors in the marketplace.
ASSET PROTECTION TRUST - A trust, domestic or offshore, that is designed to protect the assets of the settlor while at the same time allowing the settlor to be a beneficiary
ASSETS - Items of value owned by any entity, whether an individual, corporation, partnership, trust, or estate.
ATTESTATION CLAUSE - Witness clause stating that the testator is of sound mind and that he signed the document in the witness' presence.
ATTORNEY-IN-FACT - Agent or power holder of a power of attorney. The person named to act as legal agent for the person who gives the power of attorney.
BALANCE SHEET - A financial statement that reports a company's assets, liabilities and shareholders' equity at a specific point in time, and provides a basis for computing rates of return and evaluating its capital structure. It provides a snapshot of what a company owns and owes, as well as the amount invested by shareholders.
BARBELL INVESTMENT STRATEGY - An investment strategy where half of the holdings are short-term, and half are long-term. The one portion of the portfolio is invested ultrasafe, cash, t-bills or government bonds that may pay a modest level of interest, easily accessed, but likely will not lose their value. The remaining part of the portfolio may be invested in more higher risk investments, from operating businesses, direct investments, private equity or equities.
BASIS - The acquisition cost of any asset.
BENEFICIARY - The person(s) who hold(s) the beneficial title to a trust's assets.
BENEFICIARY DEFECTIVE INHERITOR’S TRUST (BDIT) - An irrevocable trust that freezes the value of assets for gift and estate tax purposes when such assets are sold to the trust by a beneficiary (“beneficiary-seller”), who has the added benefit of being eligible to receive future discretionary distributions from the trust.
BENEFICIARY DEFECTIVE INTER VIVOS TRUST - An irrevocable trust that freezes the value of assets for gift and estate tax purposes when such assets are sold to the trust by a beneficiary (“beneficiary-seller”), who has the added benefit of being eligible to receive future discretionary distributions from the trust.
BEQUEST - A gift of money or other property under a will or trust
BEQUEST CLAUSE - Directs the distribution of property, whether cash, tangible property, intangible property, or real property.
BETA - A measure of a stock’s volatility in relation to the overall market. It is used with the capital asset pricing model, which describes the relationship between systemic risk and expected return for assets.
BLIND TRUST - A revocable trust arrangement whereby an individual transfers property to the trust for management purposes when self-management of the assets might be deemed to be a conflict of interest.
BLOCKAGE DISCOUNT - A reduction in the fair market value of a large block of stock because the transfer of a large block of stock is less marketable than other transfers of smaller amounts of stock.
BOND - A fixed income investment in which an investor loans money to an entity that borrows the funds for a defined period at a fixed interest rate
BOND FUND - Invests primarily in bonds with the primary goal of generating monthly income for investors. Provides instant diversification for investors.
BONUS DEPRECIATION - A tax incentive that allows a business to immediately deduct a large percentage of the purchase price of eligible assets.
BOOK INCOME - A company’s financial income before tax adjustments which is reported to investors or shareholders.
BUSINESS INTEREST - The involvement of an individual or their family members in a business or profession or the direct interest they may have in a company providing goods or services.
BYPASS TRUST - A trust created to ensure that an individual makes use of his applicable estate tax credit. Also known as a B Trust or Credit Shelter Trust
CAPITAL GAIN PROPERTY - Property that, when sold, results in either capital gain or Section l23l gain.
CAPITAL GAINS TAX - A form of income tax that is paid on the gain from capital assets, including securities, retail properties, and business interests.
CAPITAL GROWTH - An increase in the value of an asset or investment overtime.
CAPITAL LOSS - The loss incurred when a capital asset decreases in value and is recognized with the asset is sold for a price lower than the original purchase.
CAPITAL STACK - This defines who has the rights (and in what order) to the income and profits generated by the property throughout the hold period and upon sale. Debt holders are paid prior to equity holders.
CASH BASIS ACCOUNTING - An accounting method that recognizes revenues and expenses at the time cash is received or paid out. This contrasts accrual accounting, which recognizes income at the time the revenue is earned and records expenses when liabilities are incurred regardless of when cash is received or paid.
CASH FLOW STATEMENT - A financial statement that provides aggregate data regarding all cash inflows a company receives from its ongoing operations and external investment sources. It also includes all cash outflows that pay for business activities and investments during a given period.
C-CORPORATION - A type of legal structure for a corporation in which the owners, or shareholders, are taxed separately from the entity
CERTIFICATE OF DEPOSIT - A product offered by banks and credit unions that provides an interest rate premium in exchange for a lump sum deposit untouched for a specific period.
CERTIFIED FINANCIAL PLANNER (CFP) - Professional designation attained by a person who has successfully completed the requirement of the Certified Financial Planner Board.
CHARITABLE LEAD ANNUITY TRUST (CLAT) - A trust that makes a fixed number of annual payments, calculated as a percentage of the asset value as of the date of the grantor’s gift into the trust, to charity. At the end of the lead period, the remaining assets are distributed to non-charitable remaindermen.
CHARITABLE LEAD TRUST (CLT) - An irrevocable trust designed to provide financial support to one or more charities for a period of time, with the remaining assets eventually going to family members or other beneficiaries. They are often considered to be the inverse of a charitable remainder trust.
CHARITABLE LEAD UNITRUST (CLUT) - A trust that makes a fixed number of annual payments to charity, calculated on a percentage of the assets valued on the second business day of each year. At the end of the lead period, the remaining assets are distributed to non-charitable remaindermen.
CHARITABLE REMAINDER ANNUITY TRUST (CRAT) - A trust that provides a fixed annuity to the donor (usually for life) for an amount that is greater than or equal to 5% of the initial net fair market value of the property contributed to the trust. The remainder interest of the trust passes to a named charitable organization.
CHARITABLE REMAINDER TRUST (CRT) - A trust in which a noncharitable beneficiary receives the income interest and a charitable organization receives the remainder interest.
CHARITABLE REMAINDER UNITRUST (CRUT) - A trust that provides a payment to the donor (usually for life) equal to a fixed percentage of the trust assets as valued annually. The remainder interest of the trust passes to a named charitable organization.
CHRONICALLY ILL INDIVIDUAL - A person who has been certified by a licensed health care provider as being unable to perform, without assistance, at least two activities of daily living for at least 90 days, or a person with a similar level of disability.
CHURN - to buy and sell securities frequently with the sole intention of earning more commissions.
CLOSED-END FUND - A portfolio of pooled assets that raises a fixed amount of capital through an initial public offering and then lists shares for trade on a stock exchange.
CODE OF CONDUCT - A policy that a family develops to outline the expected behavior, decorum, values to be upheld, and/or how to act in private or public forums.
CODICIL - A document that amends a will. A codicil is prepared subsequent to and separate from the will to modify or explain the will.
COMMERCIAL TRUST COMPANY - A professional corporate trustee; an entity that provides trust and fiduciary services to multiple, unrelated clients.
COMMON DISASTER - Where two or more people, including the testator and a beneficiary, die in the same accident and it is impossible to tell who died first
COMMON LAW - Law deriving from court decisions and ancient usages and customs, as opposed to statutory law, created by legislatures.
COMMUNITY FOUNDATION - A publicly supported philanthropic institution composed primarily of permanent funds established for long-term charitable benefit.
COMMUNITY PROPERTY - A regime in which married individuals own an equal undivided interest in all of the property accumulated, utilizing either spouse’s earnings, during the marriage.
COMPLEX TRUST - A trust that does not meet the definition of a simple trust in a given tax year.
COMPOUND INTEREST - Interest calculated on the initial principle which also includes all accumulated interest from previous periods on a deposit or loan.
CONFLICT OF INTEREST - Occurs when an individual's personal interests – family, friendships, financial, or social factors – could compromise his or her judgment, decisions, or actions in the workplace. Government agencies take conflicts of interest so seriously that they are regulated.
CONFLICT RESOLUTION POLICY - This policy provides guidance on how the family will resolve conflict or differences.
CONSERVATOR - Similar to a guardian, but with less-restrictive rules.
CONTINENT LEGATEE - An individual who would be the alternate inheritor of the bequest.
CONTINGENT BENEFICIARY - The person or entity who will receive proceeds if the primary beneficiary is deceased, unable to be located, or refuses the inheritance at the time the proceeds are to be paid.
CONTINGENT LEGATEE - An individual who would be the alternate inheritor of the bequest.
CONTINGENT LEGATEE CLAUSE - A clause in a will that names a secondary person to inherit if the original legatee is dead or disclaims the property.
CONVENIENCE ACCOUNT - An account—usually a bank account— that has been opened in joint names but only for the convenience of one of the joint owners and not with the intent that the noncontributing owner receive the balance in the account. As a result, the account could be part of a deceased owner’s probate estate
CORPORATE BOND - A debt issued by a company in order for it to raise capital. An investor is effectively lending money to the company in return for interest payments, but they may also be traded on the secondary market.
CORPORATE TRUSTEE - A corporation authorized by law to act in a fiduciary capacity for individuals and other corporations.
CORPUS - The principal of the trust, the entire amount of the trust not including the income it generates.
CORRELATION - A statistic that measures the degree to which two securities move in relation to each other.
COST BASIS - The original value of an asset for tax purposes, usually the purchase price, adjusted for stock splits, dividends, and return of capital distributions.
COST OF GOODS SOLD (COGS) - The direct costs of producing the goods sold by a company which includes materials and labor.
CO-TENANCY - When two or more parties own the same property at the same time and the property remains undivided
CO-TENANT - One of the owners under a co-tenancy
CO-TRUSTEE - Another person, often a family member, who serves with the trustee in helping to make decisions concerning the trust
COUPON - The annual interest rate paid on a bond, expressed as a percentage of the face value, also referred to as the coupon rate
COUSIN CONSORTIUM - Often in a third generation where there is a number of different cousins who have ownership in the business.
CREDIT SHELTER TRUST - A type of irrevocable trust used by married couples to reduce estate taxes by taking full advantage of state and federal estate tax exemptions. It will be formed upon the death of one of the spouses, leaving the maximum tax-exempt amount to children and/or grandchildren, while giving the surviving spouse access to the income from the transferred property without adding it to his or her estate.
CRUMMEY NOTICE - Used to transform what would otherwise be a future gift into a present gift.
CRUMMEY POWER - Used to transform a transfer in trust into a present interest that qualifies for the annual exclusion, even though the holders of such powers rarely exercise the power of withdrawal.
CRUMMEY PROVISION - The explicit right of a trust beneficiary to withdraw some or all of any contribution to a trust for a limited period of time after the contribution. A Crummey provision converts what otherwise would have been a gift of a future interest (net eligible for the annual exclusion) to a gift of a present interest, eligible for the annual exclusion.
CRUMMEY TRUST - A trust that contains Crummey powers, although otherwise it could be any type of trust
CURRENCY - Money in the form of paper or coins used in a country.
CURRENT LIABILITIES - A company’s short-term financial obligations that are due within one year or within a normal operating cycle.
CURRENT RATIO - The current ratio is a liquidity ratio that measures whether a firm has enough resources to meet its short-term obligations. It compares a firm's current assets to its current liabilities. The current ratio is an indication of a firm's liquidity.
CURTESY - The right of a widower, under common law, to a life estate in the decedent’s real estate. Abolished in many states.
CUSIP NUMBER - The nine-digit identifier for a marketable security, issued by the Committee on Uniform Security Identification Procedures.
CUSTODIAN - A financial institution that holds the securities for safekeeping to prevent them from being stolen or lost.
DEATH TAX - Also known as the estate tax; 13 states levy an estate tax at the state level. The estate tax is also levied at the Federal level.
DEBT FUND - Invests primarily in bonds with the primary goal of generating monthly income for investors. Provides instant diversification for investors.
DEBT TO EQUITY RATIO - The debt-to-equity (D/E) ratio is calculated by dividing a company's total liabilities by its shareholder equity. These numbers are available on the balance sheet of a company's financial statements.
DECANTING - The act of distributing assets from one trust to a new trust with different terms or a different situs.
DECEDENT - A legal term used by tax, estate planning, and law arenas for a deceased person. When a decedent is a legitimate taxpayer, all of his possessions become part of his estate, and he becomes denoted as a decedent, or deceased.
DECEDENT’S ESTATE - The property owned by the decedent on his or her date of death. Has different meanings for both probate and estate tax purposes.
DECLARATION CLAUSE - Clause in a will which states this is the last will and testament of the testator, revoking all previously made wills and codicils, and that the testator is not under duress or undue influence to make the will.
DECLARATION DATE - The date a corporation declares (announces) it will be paying a dividend.
DELIVERY INSTRUCTIONS - The specific routing and account numbers necessary to send cash and/or securities from one bank or brokerage to another.
DEMONSTRATIVE GIFT - A general gift that specifies where the asset is coming from.
DEPRECIATION - The monetary value of an asset decreases over their useful lifetime due to use, wear and tear or obsolescence. This decrease is measured as depreciation. Machinery, equipment, currency are some examples
DEPRECIATION EXPENSE - The amount that a company's assets are depreciated for a single period. It is reported on the income statement as any other normal business expense.
DEVISE - Term describing how real property is left by will.
DIRECT SKIP - A transfer of property directly to A skip person
DISCLAIM - to refuse to accept a bequest or devise before it’s received.
DISCLAIMER CLAUSE - An heir or legatee's refusal to accept a gift or bequest. The disclaimer allows assets to pass to other heirs or legatees without additional transfer tax.
DISCOUNT BOND - A bond that issues for less than its par or face Value
DISCRETIONARY - Denoting or relating to investment funds placed with a broker or manager who has discretion to invest them on the client's behalf.
DISCRETIONARY TRUST - A trust set up for the benefit of one or more beneficiaries, but the trustee is given full discretion as to when and what funds are given to the beneficiaries.
DISTRIBUTABLE NET INCOME (DNI) - A tax concept that allocates taxable income between the trust and beneficiaries to ensure the trust income is subject to only one level of tax.
DISTRIBUTION - A disbursement of assets from a fund, account, or individual security to an investor.
DIVIDEND - Distribution of some of a company’s earning to a class of its shareholders.
DOMICILE - Where one lives and intends to remain. The location of one's home.
DONEE - The person or entity that receives a gift or money
DONOR - A person or entity that donates or gifts assets or money to another person or entity
DONOR-ADVISED FUND (DAF) - A separately identified fund or account that is maintained and operated by a non-profit organization. Once the donor makes the contribution, the organization has legal control over it.
DOWER - A provision of state law in some states that gives a widow (and sometimes a widower) a life estate in a portion of the real estate owned by the decedent, based in common law.
DURABLE FEATURE - Allows a power of attorney to survive incapacity and/or disability.
DURABLE POWER OF ATTORNEY - A written document enabling one individual, the principal, to designate another person(s) to act as his attorney-in-fact. A durable power of attorney survives the incapacity and/or disability of the principal.
DYNASTY TRUST - An irrevocable trust that is designed to last for very long periods of time, preferably forever, taking advantage of states that have abolished laws against perpetuities. The advantage of these trusts is the ability to avoid estate tax at the transfer of wealth to each subsequent generation in the family.
EARNINGS PER SHARE (EPS) - Earnings per share or EPS is an important financial measure, which indicates the profitability of a company. It is calculated by dividing the company's net income with its total number of outstanding shares. ... The higher the earnings per share of a company, the better is its profitability.
EBITDA - Earnings before interest, taxes, depreciation, and amortization, is a measure of a company's overall financial performance and is used as an alternative to net income in some circumstances. EBITDA, however, can be misleading because it strips out the cost of capital investments like property, plant, and equipment.
ECONOMIES OF SCALE - The cost advantages companies experience when production becomes efficient, as costs can be spread.
EDUCATIONAL TRAINING POLICIES - Guidelines that govern family’s learning goals, expectations and skills at different ages and stages. Often these policies have more basic expectations for children under 16, with increasingly more defined and measure goals as children reach college and beyond.
EFFECTIVE TRANSFER - A transfer of a person's assets to the individual or institution intended by that person.
EFFICIENT TRANSFER - A transfer in which costs of the transfer are minimized consistent with the greatest assurance of effectiveness.
ELECTING SMALL BUSINESS TRUST (ESBT) - A trust that may make an election in order to own stock in a S corporation.
EMPLOYEE HANDBOOK - A compilation of policies, procedures, working conditions, and behavioral expectations that guide employee actions in a particular workplace.
ENROLLED AGENTS - Tax professionals licensed by U.S. Department of the Treasury.
ENTITLITIS - Life philosophy whereby individuals believe that the world and others owe them something and that respect is a mandate vs. earned.
ENTREPRENEUR - An individual who creates a new business, bearing most of the risks and enjoying most of the rewards.
ENTREPRENEURSHIP - The activity of setting up a business or businesses, taking on financial risks in the hope of profit. Entrepreneurship is high risk-risk, but also can be high reward as it serves to generate economic wealth, growth, and innovation.
ENVIRONMENTAL, SOCIAL, AND GOVERNANCE - Criteria or a set of standards for a company’s operations that socially conscious investors use to screen potential investments.
ENVIRONMENTAL, SOCIAL, AND GOVERNANCE (ESG) - Criteria or a set of standards for a company’s operations that socially conscious investors use to screen potential investments.
EQUITIES - Refers to a stock as ownership in a company.
ESCHEAT - The reversion of an heirless, intestate decedent's property to the state.
ESG - Criteria or a set of standards for a company’s operations that socially conscious investors use to screen potential investments.
ESTATE - An estate, in common law, is the net worth of a person at any point in time alive or dead. It is the sum of a person's assets – legal rights, interests and entitlements to property of any kind – less all liabilities at that time.
ESTATE FREEZE - A series of steps that are taken to set or “freeze” the value of at the current fair market value (FMV) of the shares so that other family members can buy new future growth shares at a nominal amount
ESTATE PLAN - A document that sets out an estate owner's instructions for the disposition and administration of his or her property upon death, incapacity, or total disability.
ESTATE PLANNING - The process of accumulation, management, conservation, and transfer of wealth considering legal, tax, and personal objectives.
ESTATE TAX - The federal estate tax applies to inherited assets whose value exceeds a certain (million-dollar-plus) amount transferred at death. Thirteen states levy an estate tax at the state level. The estate tax is also levied at the Federal level.
ESTATE TRUST - A trust which grants the surviving spouse a testamentary general power of appointment over the trust assets. Because of the spouse's general power of appointment over the trust's assets, the fair market value of 'the trust will be eligible for the unlimited marital deduction at the death of the first-to-die spouse.
EXCHANGE TRADED FUND (ETF) - A type of security that involves a collection of securities (e.g. stocks) that often tracks an underlying index, although they can invest in any number of industry sectors or use various strategies.
EXECUTOR - Estate representative designated in the will by the decedent. An executor may serve without bond if the bond is waived by the decedent.
EXECUTOR’S BOND - A written promise to faithfully carry out the executor’s duties.
FACE AMOUNT - Amount of money a bond issuer pays a lender at maturity.
FACTS AND CIRCUMSTANCES TEST - A subjective test that measures both financial and nonfinancial factors. The objective portion of this test mandates that public support must be at least 10% and that the organization be able to attract public support.
FAMILY ASSEMBLIES - Periodic gathering of family members (typically annual). Topics may include the state of the family business, the direction of the company and learning relevant skills such as reading financial statements.
FAMILY BOARD OF DIRECTORS - The most formal form of family governance, a family board of directors will have set terms, compensate its members, and bring diverse expertise to augment the leadership, owner and/or company executive expertise.
FAMILY BUSINESS MISSION - A description of a company's function, markets, and competitive advantages; a short statement of business goals and philosophies. A mission defines what an organization is, why it exists, its reason for being.
FAMILY COMMITTEE - A committee that has a legal duty to act in the best interest of another/others as a result of holding a position of trust and confidence.
FAMILY CONSTITUTION - An overarching document designed to capture legacies and guiding principles for the family for current and future generations. It documents the governance framework of the family, providing continuity between generations.
FAMILY COUNCIL - The governing body that represents the family. For the benefit of the greater family, the family council acts as a decision making and rule-making body, directs family communication, and is responsible for planning.
FAMILY FOUNDATION - A type of private foundation whose funding is derived from a single family.
FAMILY GOVERNANCE - The authorized oversight of family activities, including but not limited to its businesses, wealth, and opportunities. It should leverage human capital within the family and plan for succession and continuity in family decision-making.
FAMILY MEMBER EMPLOYMENT POLICIES - Guidelines for employment expectations such as gaining experience outside the family business. For example, some families require 3-5 years of related experience before being eligible for a leadership tracked position in the family business, while others ascribe that no family may ascend to a leadership position until they have accomplished experience working in x number of strategic business units for x number of years to demonstrate their knowledge and commitment.
FAMILY MISSION - A declaration of a family's core purpose and focus that normally remains unchanged over time.
FAMILY OFFICE - An entity designed to prepare family members to collectively manage, sustain, and grow their wealth across multiple generations.
FAMILY OFFICE RULE - SEC definition of the family office as any type of qualifying entity that provides investment advice to a single family including traditional family offices and private trust companies.
FAMILY POT TRUST - Trust where the trustee has discretion to distribute income and (in accordance with the terms of the trust) principal to any or all of the named beneficiaries — typically the decedent’s spouse and descendants.
FAMILY SYSTEMS THEORY - Theory developed by Dr. Murray Bowen, which states that the family is an emotional unit and any change in the emotional functioning of one member of the family/emotional unit is predictably and automatically compensated for by changes in the emotional functioning of other members of that family/emotional unit; also known as Bowen theory.
FAMILY VALUES - A declaration that informs the family about top priorities and what its core beliefs are.
FEDERAL INCOME TAX - Reports benefits received by the Social Security Administration. These benefits include retirement, disability, and others in a given year.
FEDERAL INSURANCE CONTRIBUTIONS ACT (FICA) - A federal payroll contribution from employees and employers to fund Social Security and Medicare.
FEE SIMPLE - A complete individual ownership of property with all the rights associated with out-right ownership.
FELONIOUS HOMICIDE STATUTE - Statute that prevents heirs who feloniously participated in the decedent's death from inheriting via the will or state intestacy laws.
FIDUCIARY - A person who has a legal duty to act in the best interest of another as a result of holding a position of trust and confidence.
FIDUCIARY COMMITTEE - A committee that has a legal duty to act in the best interest of another/others as a result of holding a position of trust and confidence.
FIDUCIARY COUNCIL - A group charged with shared responsibility for a fiduciary, typically established and governed by a trust agreement or family constitution.
FIDUCIARY DUTY - a fiduciary duty is a legal term describing the relationship between two parties that obligates one to act solely in the interest of the other.
FIDUCIARY OVERSIGHT - As the fiduciary of the organization, the board as a body and each individual board member must always act for the good of the nonprofit. ... The board is expected to exercise due diligence while overseeing that the organization is well-managed and its financial situation remains sound.
FIDUCIARY STANDARD OF CARE - The fiduciary standard of care requires that a financial adviser act solely in the client’s best interest when offering personalized financial advice.
FINANCIAL ASSET - A liquid asset that gets its value from a contractual right or ownership claim. Cash, stocks, bonds, mutual funds, and bank deposits are examples.
FINANCIAL INDUSTRY REGULATORY AUTHORITY (FINRA) - An independent, nongovernmental organization that writes and enforces the rules governing registered brokers and broker-dealer firms in the United States.
FINANCIAL POSITION - A document that provides a snapshot of one’s financial position at a point in time and lists assets, liabilities, and net worth.
FINANCIAL SERVICES PROFESSIONAL - A person who works with clients on financial planning and investment strategies.
FINANCING ACTIVITIES - Reports debt and equity transactions, such as the issuance and retirement of debt and equity positions, e.g. stock; dividend payments are also reported here.
FIXED INCOME MUTUAL FUND - Invests primarily in bonds with the primary goal of generating monthly income for investors. Provides instant diversification for investors.
FORCED HEIRSHIP - A state requirement that a certain portion of the decedent's estate be transferred to a spouse and, in some instances, children.
FORM 1040 - The standard federal income tax form people use to report their income to the IRS, claim tax deductions and credits, and calculate the amount of their tax refund or tax bill for the year.
FORM 1099 - Records income received by independent contractors. Independent contractors may receive multiple 1099 forms, depending upon the number of clients they have.
FORM 1099-R - Reports retirement income distributions such as from pensions, annuities, IRAs, retirement or profit-sharing plans, etc.
FORM 4868 - The Application for Automatic Extension of Time to File U.S. Income Tax Return. If you are unable to file your federal individual income tax return (IRS Form 1040) by the due date, you can apply for an automatic 6-month extension of time to file.
FREE CASH FLOW - The cash a company produces through its operations, less the cost of expenditures on assets. FCF is the cash left over after a company pays for its operating expenses and capital expenditures.
FUND MANAGER - The entity responsible for implementing a fund’s investing strategy and managing its portfolio trading activities.
FUNDING - The transfer of property to a trust
FUTURE INTEREST - In property law and real estate, a future interest is a legal right to property ownership that does not include the right to present possession or enjoyment of the property. A form of property ownership in which the owner can transfer that interest or sell it or will it to another person or have a creditor seize it.
FUTURE VALUE - The projected future value of a current sum of money or of a projected cash flow stream, calculated using a known or estimated rate of return and a known or estimated time period between the present and the future date(s).
GAAP - Generally Accepted Accounting Principles. A set of accounting principles set forth by the FASB that U.S. companies must follow when putting together financial statements.
GAAP - Generally accepted accounting principles, or GAAP, are a set of rules that encompass the details, complexities, and legalities of business and corporate accounting. The Financial Accounting Standards Board (FASB) uses GAAP as the foundation for its comprehensive set of approved accounting methods and practices.
GENERAL GIFT - A tranfer of an asset that does not provide specific details of the gift.
GENERAL LEDGER - The main ledger in an accounting system, which includes all accounts that are being accounted for.
GENERAL POWER OF APPOINTMENT - The power of the trust beneficiary to appoint all or any of the trust property to anyone he or she chooses, including himself or herself, or his or her estate, at any time during his or her lifetime, or upon his or her death.
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES - Generally accepted accounting principles, or GAAP, are a set of rules that encompass the details, complexities, and legalities of business and corporate accounting. The Financial Accounting Standards Board (FASB) uses GAAP as the foundation for its comprehensive set of approved accounting methods and practices.
GENERATION SKIPPING TRUST (GST) - A type of legally binding trust agreement in which the contributed assets are passed down to the grantor's grandchildren, thus 'skipping' the next generation, the grantor's children.
GENERATION-SKIPPING TRANSFER TAX (GSTT) - Property transfer from a grandparent directly to a grandchild or great grandchild
GENOGRAM - Family tree.
GIFT TAX - A tax that applies to transfers made while a person is living
GIFT TAX EXCLUSION - The amount of a gift that is not subject to a gift tax, usually measured or allowed on an annual basis
GOODS AND SERVICES TAX (GST) - A value-added tax levied on most goods and services sold for domestic consumption. It is paid by consumers, but sent to the government by the businesses selling the goods and services.
GRANTOR - The person who creates and initially funds a trust. The grantor is also known as the settlor or creator.
GRANTOR RETAINED ANNUITY TRUST (GRAT) - A financial instrument used to minimize taxes on large financial gifts to family members. An irrevocable trust is created for a certain term or period of time. The grantor pays a tax when the trust is established.
GRANTOR RETAINED INCOME TRUST (GRIT) - A trust in which the grantor retains an income or use interest in the trust.
GRANTOR RETAINED UNITRUST (GRUT) - A GRAT where the income fluctuates and is not a set amount.
GRANTOR TRUST - A type of living trust in which the grantor retains control over the trust’s income and assets.
GROSS ESTATE - The total dollar value of an individual’s assets at the time of their death, which does not consider debts owed and liabilities.
GROSS MARGIN - Gross margin is a company's net sales revenue minus its cost of goods sold (COGS). In other words, it is the sales revenue a company retains after incurring the direct costs associated with producing the goods it sells, and the services it provides. The higher the gross margin, the more capital a company retains on each dollar of sales, which it can then use to pay other costs or satisfy debt obligations. The net sales figure is simply gross revenue, less the returns, allowances, and discounts.
GROSS PROFIT - Profit a company makes after deducting the costs associated with making and selling its products or services.
GUARDIAN - A guardian is an individual who has been given the legal responsibility to care for a child or adult who does not have the capacity for self-care.
GUARDIAN AD LITEM - A representative (usually an attorney) appointed by the court to represent the interest of a minor or incompetent person
GUARDIANSHIP - A legal relationship created when a person or institution named in a will or assigned by the court to take care of minor children or incompetent adults.
GUARDIANSHIP CLAUSE - A clause in a will which allows the testator to identify an individual(s) to raise any minor children.
HARMONIZED SALES TAX (HST) - A consumption tax paid by local consumers and businesses. It combines the Canada's federal goods and services tax and various provincial sales taxes.
HEIR - One who inherits under state law.
HEIRS-AT-LAW - Persons who inherit a decedent’s estate under state statutes of descent and distribution if the decedent died intestate.
HIGH-YIELD BOND - Debt that has been given a low credit rating, below investment grade. These are riskier because there is a higher chance of default. Investors are compensated with higher interest rates which is why these are also called high-yield bonds.
HOLOGRAPHIC WILL - Handwritten will.
HORIZONTAL ANALYSIS - Compares historical data, such as ratios, or line items, over a number of accounting periods.
ILLIQUID - Securities or assets that cannot be sold or exchanged easily for cash without a significant loss in value
IMPACT INVESTING - The practice of making investments in companies, organizations, and funds with the intention of generating measurable social and environmental impact alongside a financial return.
INCIDENTS OF OWNERSHIP - Having the right to name or change the beneficiary of a life insurance policy, to assign the policy to another or revoke the assignment, to surrender or cancel the policy, and to pledge the policy as collateral for a loan, or to obtain a loan against the surrender value.
INCOME BENEFICIARY - The person or entity who has the current right to income from a trust, or the right to use the trust assets.
INCOME STATEMENT - One of the three financial statements used for reporting a company's financial performance over a specific accounting period. Also known as the profit and loss statement or the statement of revenue and expense.
INCOME TAX - A type of tax that governments impose on income generated by businesses and individuals.
INDEPENDENT TRUSTEE - A trustee who is not related to the beneficiary of the trust and does not stand to inherit any property under the trust.
INFLATION - A quantitative measure of the rate at which the average price level of a basket of selected goods and services in an economy increases over some period of time.
INFORMATION SECURITY POLICY - Guidelines for how family members are to secure information, how they are to set-up, maintain and use mobile devices and/or computers, what firewalls, internet safety software and protection measures to thwart cyber hackers, trolls, predators and perpetrators.
INHERITANCE TAX - Tax on the amount inherited by a particular beneficiary rather than the estate as a whole.
INITIAL PUBLIC OFFERING (IPO) - The process of offering shares of a private corporation to the public in a new stock issuance.
INSTITUTIONAL INVESTORS - A company or organization that invests money on behalf of other people. Examples include mutual funds and insurance companies.
INTANGIBLE PERSONAL PROPERTY - Property other than real estate and other than property that can be “touched” eg stocks, bonds, bank accounts, copyrights, patents, etc. as they all merely represent the right to receive something of value.
INTANGIBLES - Assets that you can’t readily hold in your hand, such as stocks and bonds.
INTANGIBLES TAX - A tax on certain intangible assets.
INTENTIONALLY DEFECTIVE GRANTOR TRUST (IDGT) - An estate-planning tool used to freeze certain assets of an individual for estate-tax purposes, but not for income-tax purposes. It is effectively a grantor trust with a purposeful flaw that ensures the individual continues to pay income taxes.
INTER VIVOS TRUST - A trust created during a lifetime and refers to trusts created during a person's lifetime as compared to testamentary trusts which are created in a will and come into effect on the testator's / testatrix's death.
INTEREST EXPENSE - Relates to the cost of borrowing money. It is the price that a lender charges a borrower for the use of the lender’s money.
INTEREST RATE - The amount charged, expressed as a percentage of the principal, by a lender to a borrower for the use of assets
IN-TERROREM CLAUSE - A statement in a will or trust providing that any beneficiary who contests the document or in any way interferes with its operation will forfeit his share. Binding in most states
INTESTATE - To die without having a valid will or to die with a will that does not distribute all property.
INTRAPRENEURSHIP - A system that allows an employee to act like an entrepreneur within an organization. They are self-motivated, proactive, and action-oriented people who take the initiative to pursue the development of innovative products or services. These employees do not have a personal cost of failure, like entrepreneurs, since the organization absorbs losses.
INTRODUCTORY CLAUSE - A clause in a will which identifies the testator.
INVESTING ACTIVITIES - Reports the purchase and sale of long-term investments and fixed assets, such as equipment.
INVESTMENT ADVISOR - A person that makes investment recommendations or conducts securities analysis in return for a fee, whether through direct management of clients' assets or by way of written publications.
INVESTMENT POLICY - A customized document for an investor that articulates their tailored investment objectives, risk tolerance, preferences, time horizon(s), strategy, and or approaches.
INVESTMENT POLICY STATEMENT - A customized document for an investor that articulates their tailored investment objectives, risk tolerance, preferences, time horizon(s), strategy, and or approaches.
IRREVOCABLE - Not able to be changed, reversed, or recovered; final.
IRREVOCABLE LIFE INSURANCE TRUST (ILIT) - An irrevocable trust that owns and holds life insurance on its grantor's life. An ILIT is also known as a wealth replacement trust (WRT).
IRREVOCABLE TRUSTS - A trust created by a granter that cannot be revoked or that cannot become irrevocable upon the grantor's death.
ISSUE - Lineal descendants of a person, ie, children, grandchildren, greatgrandchildren, etc
ITEMIZED DEDUCTION - A form of income tax that is paid on the gain from capital assets, including securities, retail properties, and business interests.
JOINT OWNERSHIP - When two or more people own the same property at the same time, generally in equal shares, with the understanding that on the death of any one, the survivor(s) will own the whole
JOINT PROPERTY - Any property in joint ownership form (not just real estate)
JOINT TENANCY (WITH RIGHT OF SURVIVORSHIP) - An undivided interest in property held by two or more related or unrelated persons, generally includes a right of survivorship.
JOINT WILL - One will executed by two or more individuals jointly that transfers their common interest in property.
JUNK BOND - Debt that has been given a low credit rating, below investment grade. These are riskier because there is a higher chance of default. Investors are compensated with higher interest rates which is why these are also called high-yield bonds.
K-1 - Lists taxable income for types of business entities. Two groups of taxpayers need to file a Schedule K-1 with their taxes: 1) owners of pass-through business entities such as S-corps, partnerships and LLCs taxed as an S-corp or partnership, and 2) beneficiaries of trusts or estates.
KIDDIE TAX - The income tax imposed on the unearned income (dividends, interest) in excess of an annual exemption, on a child under age fourteen. The tax on the excess income is imposed at the parent’s highest tax rate
KIDNAP AND RANSOM POLICIES - Guidelines and protocols should situations arise where a family member is kidnapped including ransom negotiation and private security details. High profile families or those living in 2nd and 3rd world countries may have a policy to address contingency plans when/if a family member should be kidnapped. For example, a South American family had a policy to convene a group of family business owners from around South America when/if a family member was kidnapped, and to have this elder council negotiate with the kidnappers, rather than solely relying on local, state or federal officials, whom they feared may be corrupt. Other families have private security details, former CIA/FBI operatives, and/or other intelligence protocols to activate should a family member be taken hostage and held for ransom.
LAPSED GIFT - A gift or bequest that is not paid to the named beneficiary because he or she is deceased and the will did not provide for the bequest to be paid to another
LEGATEE - Individuals who would be the inheritors of the bequest under a will.
LETTER OF WISHES - A non-binding document written by the creator of a discretionary trust to share personal thoughts and perspectives with those who will be serving over the years as trustees. Commonly contained are posthumous expressions of thanks or love to the objects of the trust.
LETTERS OF ADMINISTRATION - The official document given by the court authorizing the executor or administrator to act. Also known as letters testamentary
LIABILITIES - Usually a sum of money that a person (or company) owes. Examples include loans, mortgages, accounts payable, and deferred revenues.
LIFE ESTATE - The right to the use of property during one’s lifetime only, after which the property belongs to the “remaindermen” outright
LIFE TENANT - A person who has a life estate
LIFETIME GIFT TAX EXEMPTION - Any gift over that amount given to a single person in one-year decreases both your lifetime gift tax exemption and the federal estate tax exemption you will receive when you die. The lifetime exemption is $11.58 million in 2020. The annual gift tax exclusion is $15,000.
LIMITED POWER OF APPOINTMENT - The right of a trust beneficiary to designate, from a group of specified appointees (usually the grantor’s children and grandchildren, or charities), who may receive trust assets either at any time or after the death or other termination of the beneficiary’s interest.
LIQUID ASSET - Any asset that can be easily converted into cash without having a significance on its value
LIQUID INVESTMENT - Any investment that can be easily converted into cash without having a significance on its value
LIQUIDITY - The ease in which an individual or company can meet their financial obligations with liquid assets available to them.
LIQUIDITY EVENT - A liquidity event refers to a significant transaction or event that enables an individual or entity to convert their assets into cash or cash equivalents. This event provides liquidity, allowing the holder to access and utilize the funds for various purposes.
LIVING TRUST - A trust created during the lifetime of the person who created it
LIVING TRUST AGREEMENT - A living trust, specifically a revocable living trust, is a legal document that places your assets—investments, bank accounts, real estate, vehicles and valuable personal property—in trust for your benefit during your lifetime, and spells out where you'd like these things to go upon your death.
LIVING WILLS - Legal document expressing an individual's last wishes regarding life-sustaining treatment.
LOAD - Sales charges paid by investors to purchase mutual fund shares.
LOCAL TAX - Lists taxable income for types of business entities. Two groups of taxpayers need to file a Schedule K-1 with their taxes: 1) owners of pass-through business entities such as S-corps, partnerships and LLCs taxed as an S-corp or partnership, and 2) beneficiaries of trusts or estates.
MARITAL DEDUCTION - A deduction for estate and gift tax purposes for the amount of property that passes to a spouse from the other spouse
MARITAL DEDUCTION TRUST - A trust established to receive an amount on behalf of the surviving spouse that qualifies for the marital deduction
MARITAL TRUST - A type of trust used by married couples to reduce estate taxes. It will be formed upon the death of one of the spouses, often in conjunction with a credit shelter trust. Since there is no estate tax related to death transfers made to a surviving spouse, assets that are not being left to children or grandchildren to fully utilize estate tax exemptions will be transferred to this trust for the benefit of the surviving spouse.
MATURITY - The finite time period at the end of which the financial instrument will cease to exist and the principal is repaid with interest
MEDICARE - Federal government levies a tax on individual’s wages for Medicare, which may be claimed by individual’s once they reach retirement.
MILLER TRUST - A “safe harbor” trust under the Medicaid rules, allowing a trust to be funded with the income of a Medicaid beneficiary in an “income-cap” state, so that the beneficiary may qualify for Medicaid
MODERN PORTFOLIO THEORY (MPT) - A theory on how risk-averse investors can construct their investment portfolios to maximize expected return based on a given level of market risk. Harry Markowitz pioneered the theory in 1953.
MONEY MARKET - An interest-bearing account at a bank or credit union.
MONTE CARLO SIMULATION - A statistical technique that allows financial advisors to model various investment scenarios to assess the probability of different outcomes, thereby aiding in risk management and decision-making
MULTI-FAMILY OFFICE - Commercialized operations that support multiple, typically unrelated families with a suite of family office services.
MUNICIPAL BOND - A debt security issued by a state, municipality or county to finance its capital expenditures, including the construction of highways, bridges or schools.
MUTUAL FUND - A type of financial vehicle made up of a pool of money from many investors to invest in securities like stocks, bonds, and other assets.
MUTUAL WILL - Two or more identical wills that leave all assets to the reciprocal party.
NET ASSET VALUE (NAV) - The net value of an entity. Calculated as the total value of the entity’s assets minus the total value of its liabilities. The per share/unit price of the fund on a specific date or time.
NET INCOME - The residual amount of earnings after all expenses have been deducted from sales which reflects a company’s profit.
NET INVESTMENT INCOME TAX - A 3.8% tax on investment income (interest, dividends, capital gains, rents, royalties, and annuities) if an individual’s income is above a certain threshold.
NO-CONTEST CLAUSE - A clause in a will that discourages heirs from contesting the will by substantially decreasing or eliminating bequests to them if they file a formal legal contest to the will.
NOMINEE TRUST - A special purpose trust, originally designed to hold real estate and thus sometimes called a “realty trust,” where the identity of the beneficiaries is contained in a document separate from the rest of the trust to keep his or her name off the property deed, out of the local Registry of Deeds, and out of public view.
NONPROBATE PROPERTY - Property owned or partially owned by the deceased but which does not pass through his probate estate, such as jointly held property or property in a living trust
NUNCUPATIVE WILL - An oral will, allowed only in extreme cases (and not in all states) such as where the testator faces imminent death consisting of dying declarations.
OFFSHORE TRUST - A trust that is settled and governed by the laws of a jurisdiction other than the United States. In the vernacular, generally one that is literally offshore, such as Gibraltar, the Cook Islands, the Bahamas, etc., and generally used for asset protection purposes. (See Asset protection trusts)
OPEN-END FUND - A diversified portfolio of pooled investor money that can issue an unlimited number of shares. The fund sponsor sells shares directly to investors and redeems them as well. These shares are priced daily, based on their current net asset value. Some mutual funds, hedge funds, and exchange-traded funds are types of open-end funds.
OPERATING ACTIVITIES - Reports items reported on the income statement from the accrual basis of accounting to the cash basis of accounting by also using changes in the Balance Sheet during the period.
OPERATING AGREEMENTS - A legal document that outlines the ownership and member duties of an LLC and allows for setting out the financial and working relations among business owners (“members”) and between members and managers.
OPERATING EXPENSE - The ongoing cost of running a product, business, or system.
OPERATING INCOME - Operating income is an accounting figure that measures the amount of profit realized from a business's operations, after deducting operating expenses such as wages, depreciation and cost of goods sold (COGS). Operating income—also called income from operations—takes a company's gross income, which is equivalent to total revenue minus COGS, and subtracts all operating expenses.
ORDINARY INCOME - Income from wages, interest, and rental income
ORIGINAL WILL - The only signed copy of a will at any given time.
OUTSOURCED CIO - Chief Investment Officer who works as a fiduciary with legal accountability to protect your assets and to advise objectively about the risks and opportunities associated with investments.
OVERQUALIFIED - A decedent's taxable estate is less than the applicable estate tax credit equivalency, usually the result when too many assets pass to a surviving spouse.
PAID-UP POLICY - A life insurance policy on which all the premiums have been paid. The policy remains in force until the insured’s death.
PAR VALUE STOCK - Have a minimum value per share, set by the company that issues it.
PARTNERSHIP - The standard federal income tax form people use to report their income to the IRS, claim tax deductions and credits, and calculate the amount of their tax refund or tax bill for the year.
PASSIVE INCOME - A stream of income that requires very little work on behalf of the owner.
PATIENT CAPITAL - Also known as long-term capital in which the investor does not expect to make a quick profit.
PAYABLE ON DEATH (POD) ACCOUNT - See Totten Trust payment date:
PAYMENT RATE - An installment loan with an interest rate that cannot be changed for the life of the loan
PAYROLL TAX - Federal payroll tax is 7.65%; payroll tax is imposed equally on the employee and employer on annual wages
PECUNIARY GIFT - A gift of a specific sum of money.
PENSION - A retirement plan that requires an employer to make contributions to a pool of funds set aside for a worker’s future benefit.
PER CAPITA - A method to pass on wealth by family member head count (E.g., Testator passes $100 to 10 surviving children and grandchildren. Each receives $10.).
PER STIRPES - A method to pass on wealth by family branch. (E.g. Testator passes $100 to four surviving children. All four children receive $25 per branch regardless of the number of grandchildren in each branch.)
PERSONAL BALANCE SHEET - Provides an overall snapshot of wealth at a specific period in time. It is a summary of assets (own), liabilities (owe), and net worth (assets-liabilities).
PERSONAL INCOME TAX - Income from wages, interest, and rental income
PERSONAL PROPERTY - Any tangible property that can be physically moved.
PERSONAL REPRESENTATIVE - A personal representative is the executor or administrator for the estate of a deceased person and serves as a fiduciary of the estate's beneficiaries.
PERSONAL RESIDENCE TRUST (PRT) - An irrevocable trust to which a grantor may transfer a personal residence (one per trust, maximum two trusts) and retain the right to live there for a specified term of years, after which, if the grantor survives the term, the residence escapes tax in the grantor’s estate
PHYSICIAN ORDERS FOR LIFE-SUSTAINING TREATMENT - A document, constituting a physician's order, detailing the types of medical treatments an individual wishes to receive when they are within a year or so of death. The POLST is part of the patient's medical record and is used to minimize the potential for medical errors in providing treatment.
POOLED TRUST - An exception that resulted from the Omnibus Budget and Reconciliation Act of 1993; managed by a nonprofit association. While each beneficiary will have their own account, the assets will generally be pooled and managed together.
POT TRUST -
POUR-OVER PROVISION - A provision in a will that usually gives the bulk of the estate to a living trust created by the testator before or at the time the will is signed
POUR-OVER TRUST - A trust that receives assets that pour into it from another source, generally the grantor's estate at the grantor's death.
POUR-OVER WILL - A pour-over will pours all of a decedent’s assets into a trust that was established prior to death.
POWER OF ATTORNEY - Legal document that authorizes an agent to act on a principal's behalf.
POWER OF ATTORNEY FOR PROPERTY - A special Power of Attorney designed for a specific purpose.
POWER TO REVOKE - The ability to alter, amend, or terminate a legal document or the enjoyment of property transferred.
PREFERRED RETURN - The threshold return that the limited partners of a private equity fund must receive prior to the PE firm receiving its carried interest.
PREMARITAL AGREEMENT POLICIES - An agreement entered into prior to marriage as a means of maintaining family ownership, asset protection, and to help maintain ownership along lineal descendants, while also serving to protect new spouses as they must often clarify what to expect in the tragic event of divorce.
PREMIUM BOND - A bond trading above its face value
PRESENT INTEREST - A gift in which the donee has all immediate rights to the use, possession, and enjoyment of the property and income from the property. The annual exclusion does not apply to a future interest gift.
PRESENT VALUE - The discounted current value of a future sum of money or of a future cash flow stream, calculated using a known or estimated rate of return and a known or estimated time period between the present and the future event(s).
PRETERMITTED HEIR - A child or other lineal descendant who has been improperly omitted from the will
PRINCIPAL - The grantor or giver of a power of attorney.
PRINCIPAL AND INTEREST - Principal is the amount you borrowed and have to pay back, and interest is cost of borowing the principal.
PRINCIPAL BENEFICIARY - The person who is to receive a portion of the estate after all gifts and valuables are distributed.
PRIVATE COLLECTION - Investments in personal collections of fine art, jewelry, memorabilia, etc.
PRIVATE COMPANY - A firm held under private ownership
PRIVATE EQUITY - An alternative investment class where investors invest directly in private companies.
PRIVATE FOUNDATION - An independent legal entity set up solely for charitable purposes and whose funding is derived from a single individual, family, or corporation.
PRIVATE OPERATING FOUNDATION - A private foundation that spends at least 85% of its adjusted net income or its minimum investment return, whichever is less, on charitable services or to run charitable programs of their own. They make few, if any, grants to outside organizations.
PRIVATE TRUST COMPANY (PTC) - Also known as a family trust company, is an entity that provides trust and fiduciary services to a single-family group. It is a state-chartered, regulated entity and, as such, is prohibited from doing business with the general public.
PROBATE - The legal proceeding that serves to prove the validity of existing wills, supervise the orderly distribution of decedent’s assets to the heirs, and protect auditors by ensuring that valid debts of the estate are paid.
PROBATE PROPERTY - Property that may be transferred only through the probate procedure and would therefore include property or proceeds payable to the estate of the deceased, as well as property titled in the deceased’s name alone or as a tenant in common
PROFIT AND LOSS STATEMENT (P&L) - A financial statement that summarizes revenues, costs, and expenses in a given time period.
PROGRESSIVE TAX - Federal government levies a tax on individual’s wages for social security, which may be claimed by individual’s once they reach retirement.
PROPERTY SUBJECT TO CLAIMS - Assets available to pay the decedent’s creditors.
PROPERTY TAX - Reports supplemental income or loss from various types of business and real estate activity, such as rental real estate and royalties. Business owners file this form as part of their personal tax return.
PROPORTIONAL TAX - Federal government levies a tax on individual’s wages for Medicare, which may be claimed by individual’s once they reach retirement.
PROSPECTUS - A brochure created by every mutual fund that details the fund’s governing rules and lists a sample investment portfolio for the fund.
PROTECTOR - A person or entity other than a trustee who is given certain powers over the trust, such as the power to veto trust distributions, change trustees, etc
PROVINCIAL SALES TAX (PST) - A form of direct consumption taxation imposed by several of the Canadian provinces.
PRUDENT MAN RULE - A rule which requires a trustee, as a fiduciary, to act in the same manner that a prudent person would act if the prudent person were acting for his own benefit.
PUBLIC CHARITY - An independent legal entity set up solely for charitable purposes and whose funding is derived from the general public.
PUBLIC COMPANY - A company whose ownership is distributed among general public shareholders through publicly traded stock shares
PURPOSE TRUST - A trust that is established for a purpose (eg, furtherance of a business, maintenance of a building, care of a pet) rather than for specified beneficiaries. Not recognized in every state, but recognized in most offshore jurisdictions.
QTIP TRUST - A trust that grants the surviving spouse a lifetime right to the income of the trust while transferring the remainder interest to an individual(s) of the grantor's choosing, typically created at the death of the first spouse to die.
QUALIFIED DOMESTIC TRUST (QDOT) - A trust that is used if the surviving spouse is not a US citizen. If a QDOT is not used in such a case the marital deduction is lost.
QUALIFIED HEIRS - Certain close family members, defined by state statute.
QUALIFIED PERSONAL RESIDENCE TRUST (QPRT) - A specific type of irrevocable trust that allows its creator to remove a personal home from his or her estate for the purpose of reducing the amount of gift tax that is incurred when transferring assets to a beneficiary.
QUALIFIED SUBCHAPTER S-CORP TRUST (QSST) - A trust that is allowed to own stock in S-Corporations.
QUASI-COMMUNITY PROPERTY - Property acquired by either spouse in a non-community property state that would have been community property had the couple resided in a community-property state.
QUICK RATIO - The quick ratio is an indicator of a company’s short-term liquidity position and measures a company’s ability to meet its short-term obligations with its most liquid assets. When the quick ratio is less than 1, the company has no liquid assets to pay its current liabilities. If the quick ratio is much lower than the current ratio, this means that current assets heavily depend on inventories.
QUILT MAP - Quilt maps provide the annual returns of various asset classes in one chart.
RAINY DAY FUND - Reserve funds set aside for the unexpected
REAL ESTATE - Real estate is the land along with any permanent improvements attached to the land, whether natural or man-made—including water, trees, minerals, buildings, homes, fences, and bridges. Real estate is a form of real property.
REAL ESTATE INVESTMENT TRUST (REIT) - A company that owns, operates or finances income-producing real estate. REITs provide all investors the chance to own valuable real estate, present the opportunity to access dividend-based income and total returns, and help communities grow, thrive, and revitalize.
REAL ESTATE TAX - Property tax is a tax on property -- usually real estate -- as determined by an assessor. For example, if the property tax rate is 4% and your house's assessed value is $200,000, then your property tax liability equals (.04 x $200,000) or $8,000. The assessed value is often computed by incorporating the purchases and sales of similar properties in nearby areas.
REALIZED GAIN - Proceeds less the original cost basis plus adjustments.
RECIPROCAL WILL - Two or more identical wills that leave all assets to the reciprocal party.
RECORD DATE - Day on which stockholders must own shares to receive a dividend.
REGISTERED INVESTMENT ADVISOR - Manages the assets of high-net-worth individuals and institutional investors and sits on the buy-side of the investment field. They must register with the SEC and any states in which they operate. Most RIAs are partnerships or corporations, but individuals can also register as RIAs.
REGRESSIVE TAX - The Federal Insurance Contributions Act is a federal payroll contribution from employees and employers to fund Social Security and Medicare.
RELEASE - The document that the executor, administrator, or trustee will ask the beneficiaries to sign before receiving their bequest, releasing the estate or trust from further liability
REMAINDER BENEFICIARY - The individual or entity entitled to receive the assets that remain in the trust at the date of the trust's termination.
REMAINDER PERSON - The individual or entity entitled to receive the assets that remain in the trust at the date of the trust's termination.
REMAINDERMAN - The individual or entity entitled to receive the assets that remain in the trust at the date of the trust's termination.
RESIDUARY CLAUSE - A clause in a will which directs the transfer of the balance of any assets not previously bequeathed or distributed.
RESIDUARY DEVISEE - A person or entity named to receive all the real property not specifically devised.
RESIDUARY ESTATE - Whatever remains of the estate after payment of debts, expenses, taxes, and specific bequests. In a “pourover” will, the residuary estate is left to a living trust
RESIDUARY GIFT - What is left after any specific or pecuniary gifts have been made from the estate and all expenses and taxes have been paid.
RESIDUARY LEGATEE - A person or entity named to receive all the personal property not specifically bequeathed.
RESTATEMENTS OF THE LAW - A series of legal treatises that set out basic U.S. law on a variety of subjects, written and updated by legal scholars and published by the American Law Institutes. While not having the force of statutes or court rulings, the Restatements are prestigious and can carry some weight in a legal argument.
RETAINED INTEREST - Typically in a trust, whether revocable or irrevocable, where the settlor has retained some part or interest, such as an income stream, in the property transferred to the trust
RETAINER - An upfront deposit of funds that attorneys charge their hourly fees to on a monthly or quarterly basis.
RETURN DISPERSION - A range of possible returns on an investment, also used to measure the risk inherent in a particular security or investment portfolio.
RETURN OF CAPITAL - When payment is received that reduces an asset’s acquisition costs because some part of what was originally owned no longer exists.
RETURN ON EQUITY - Return on equity or ROE is a measure of financial performance calculated by dividing net income by shareholders’ equity. Shareholders’ equity is equal to a company’s assets minus its debt, Therefore, ROE can be thought of as the return on net assets.
RETURN ON INVESTMENT - Return on investment or ROI is the most common profitability ratio that evaluates the performance of a business by dividing net profit by net worth.
REVERSIONARY INTEREST - The interest that a person has in a property when a preceding estate ceases to exist.
REVOCABLE - Capable of being revoked or canceled
REVOCABLE LIVING TRUST - A revocable trust that is managed by the granter and is for the benefit of the granter during his lifetime. The property transferred to the trust avoids the individual's probate estate but is included in the individual's gross estate.
REVOCABLE TRUST - A trust created where the granter of the trust retains the right to revoke the trust at any time prior to his incapacity or death.
RIA - Manages the assets of high-net-worth individuals and institutional investors and sits on the buy-side of the investment field. They must register with the SEC and any states in which they operate. Most RIAs are partnerships or corporations, but individuals can also register as RIAs.
RIGHT OF SEVERANCE - The right of a co-tenant to separate or divide commonly held property under a joint tenancy or a tenancy in common
RIGHT OF SURVIVORSHIP - The right of a joint tenant (but not a tenant in common) to take the whole of the jointly held property if he survives the other joint tenant(s)
ROTH IRA - An individual retirement account that allows qualified withdrawals on a tax-free basis. Roth IRAs are funded with after-tax dollars
RULE AGAINST PERPETUITIES - A common law rule which requires that all interests in a trust must vest within 21 years after the lifetimes of those living when the interest was created.
RULE OF 72 - The Rule of 72 is a quick, useful formula that is popularly used to estimate the number of years required to double the invested money at a given annual rate of return.
RULE OF LAW - the rulers are subject to the law, there is a system of law, and each person will be treated the same.
SAVINGS ACCOUNT - An interest-bearing account at a bank or credit union.
SCHEDULE C - Reports self-employment income. This schedule is completed by filers to report their income or losses as a sole proprietor.
SCHEDULE D - Reports capital gains and losses that result from the sale of certain property including stocks and bonds, collectibles, artwork, cars, and homes, during a given year. This form is part of the individual income tax return.
SCHEDULE E - Reports supplemental income or loss from various types of business and real estate activity, such as rental real estate and royalties. Business owners file this form as part of their personal tax return.
S-CORPORATION - A type of legal structure for a corporation with 100 shareholders or less that elect to pass corporate income, losses, deductions, and credits through to their shareholders for federal tax purposes to avoid double taxation.
SECONDARIES INTEREST - The financial instruments such as stock, bonds, options, and futures bought and sold on the secondary market.
SECONDARIES MARKET - Also called the aftermarket and follow on public offering, is the financial market in which previously issued financial instruments such as stock, bonds, options, and futures are bought and sold.
SEE-THROUGH TRUST - A trust that is the beneficiary of a custodial IRA. It provides for more control over the distribution of IRA assets after the owner's death, as well as providing increased creditor protection for the beneficiaries of the trust.
SELF PROVING CLAUSE - A clause in a will which involves the notary signing a notarized declaration that he/she witnessed the testator and witnesses sign the will.
SELF-SETTLED TRUST - A trust where the beneficiary is also the granter of the trust.
SENIOR DEBT - Senior Debt, or a Senior Note, is money owed by a company that has first claims on the company's cash flows. ... These assets play a key part in the financial planning and analysis of a company's operations and future expenditures in the event that the company fails to fulfill its repayment obligations.
SETTLORS - The person who creates and initially funds a trust. The settlor is also known as the grantor or creator.
SHAREHOLDER AGREEMENT - An arrangement among a company's shareholders that describes how the company should be operated and outlines shareholders' rights and obligations. The agreement also includes information on the management of the company and privileges and protection of shareholders.
SHAREHOLDER EQUITY - The amount of assets remaining in a business after all liabilities have been settled.
SIBLING PARTNERSHIP - Second stage leaders in a family business, typically next generation siblings (or half siblings), who work in collaboration with one another.
SIDE INSTRUCTION LETTER - Also known as a personal instruction letter, details the testator's wishes regarding the disposition of tangible possessions (household goods), the disposition of the decedent's body, and funeral arrangements. A side instruction letter is not legally binding but generally followed.
SIMPLE IRA - Small businesses with 100 or fewer employees can use this retirement savings plan which allows employees and employers to contribute to traditional IRAs set up for employees.
SIMPLE TRUST - A trust that requires all of the trust income to be distributed on an annual basis to the beneficiaries and does not have a charitable organization as one of its beneficiaries.
SIMULTANEOUS DEATH CLAUSE - A clause in a will that establishes a presumption of which person died first in simultaneous death situations.
SITUS - The place, generally referring to the state, where property is located.
SKIP PERSON - A person in a generation two or more generations below the transferor’s generation
SOCIAL MEDIA POLICY - Developed to institute the rules for how family members will conduct themselves on social media, what may be permissible to share publicly or privately online (or not), what sites the family allows family members to view or have profiles, and how to secure their online profiles and data.
SOCIAL SAFETY NET - Federal payroll tax is 7.65%; payroll tax is imposed equally on the employee and employer on annual wages
SOCIAL SECURITY - Federal government levies a tax on individual’s wages for social security, which may be claimed by individual’s once they reach retirement.
SOCIALLY RESPONSIBLE INVESTING - An investment strategy that integrates social or environmental criteria into financial analysis.
SOLE PROPRIETORSHIPS - A 3.8% tax on investment income (interest, dividends, capital gains, rents, royalties, and annuities) if an individual’s income is above a certain threshold.
SOUND MIND - A person's mental capacity being sufficient.
SPECIAL NEEDS TRUST (SNT) - A specific type of trust that is used to provide benefits to persons or beneficiaries with special needs.
SPECIAL NEEDS TRUSTS UNDER 42 - Considered to be self-settled in nature, are typically established by the special needs person's parent, grandparent, legal guardian or by a court and will avoid disqualification of Medicaid and SSI benefits.
SPECIAL POWER OF APPOINTMENT - Any power that can’t be exercised in the manner described for a general power of appointment.
SPECIFIC DEVISEE - A person or entity named to receive specific real property under a will.
SPECIFIC GIFT - A specific identifiable item or group of items, such as for example a family heirloom, transfered to a specific person or group of people.
SPECIFIC LEGATEE - A person or entity named to receive designated personal property under a will.
SPENDTHRIFT CLAUSE - A clause in a trust document which does not allow the beneficiary to anticipate distributions from the trust, assign, pledge, hypothecate, or otherwise promise to give distributions from the trust to anyone. If such a promise is made, it is void and may not be enforced against the trust.
SPENDTHRIFT PROVISION - The provision in a trust agreement that allows the donor to place the share of the beneficiary out of reach of the beneficiary’s creditors. The funds of this particular beneficiary (other than the donor), while in the trust, cannot be attached or recovered by someone suing the beneficiary. (See also Asset protection trust)
SPENDTHRIFT TRUST - A trust that gives absolute control of the income and principal to the trustee to prevent the beneficiary from squandering money.
SPLIT INTEREST CHARITABLE TRUST - A trust where the grantor retains either a lead or remainder interest in the trust property, with the opposite interest (lead or remainder) going to charity.
SPRAY PROVISION - A provision in a trust giving the trustee the discretion to make unequal distributions among the beneficiaries. Also known as sprinkle provision.
SPRINGING POWER - The agent's power springs into existence upon some defined event or determination.
SSA 1099 - Reports benefits received by the Social Security Administration. These benefits include retirement, disability, and others in a given year.
STANDARD DEDUCTION - Proceeds less the original cost basis plus adjustments.
STANDBY TRUST - A trust created during the grantor's lifetime that is either unfunded or minimally funded. A standby trust is also known as a contingent trust.
STATE INCOME TAX RATES - Not all states have an income tax, but there are nine states including Alaska, Florida, Nevada, Tennessee, South Dakota, Texas, Washington, New Hampshire, and Wyoming that charge no income tax at all. The remaining states have an income tax rate between zero and 13%.
STATE TAX - Reports self-employment income. This schedule is completed by filers to report their income or losses as a sole proprietor.
STATUTORY SHARE - The share an heir is entitled to under state law if the decedent left no valid will.
STATUTORY WILL - A will meeting state statutes generally drawn up by an attorney and signed in the presence of witnesses.
STEPPED-UP BASIS - This reflects the changed tax basis/cost to the value on date of death of an inherited asset.
STOCK - Stocks are issued for the equity/ownership in a company
STRAIGHT LINE DEPRECIATION - The most commonly used method of calculating depreciation and amortization. The value of an asset is reduced uniformly over each period until it reaches its salvage value. It is calculated by dividing the cost of an asset, less its salvage value, by the useful life of the asset.
STREET NAME SECURITIES - Ownership records of marketable securities maintained by brokerage firms rather than by individual corporations. Owners receive regular statements of their holdings rather than individual certificates.
STRUCTURED SETTLEMENT TRUST - A trust that is funded with payments to be received over a period of time as the result of a settlement in a personal-injury lawsuit
SUB-LEDGER - Ledgers that account for areas with a subset of transactions that are summarized and transferred to the general ledger in total but not in detail.
SUBORDINATED DEBT - An unsecured loan or bond that ranks below other, more senior loans or securities with respect to claims on assets or earnings. Also known as junior securities. In the case of borrower default, creditors who own subordinated debt will not be paid out until after senior bondholders are paid in full.
SUCCESSION POLICY - Typically addresses leadership succession and the process whereby the family leader may step aside (down) to an emeritus role prior to retirement. In other cases, family may have leadership policies for shadow leadership with the incumbent prior to transitioning authority/control, or in other cases, families may institute bridging leadership policies, when they may be seeking transition leadership or agency-leadership or non-family during periods when family members are being groomed or trained up.
SUCCESSOR EXECUTOR - A person named in a will to replace the first-named executor if for any reason he is not able to serve
SUCCESSOR TRUSTEE - The person who assumes control of the trust after the initial trustee dies or becomes unable to continue with his or her responsibilities. Once the successor trustee has assumed control, he or she is responsible to ensure that the grantor’s property is distributed to the beneficiaries according to the terms of the trust.
SUITABILITY STANDARD OF CARE - Requires that a financial advisor make recommendations that are suitable based on a client’s personal situation but does not require the advice to be in their best interest.
SUPERVISORY OR ADVISORY BOARD - A board devised by a family to act in an advisory capacity to family owners and /or their family board of directors. It will have set terms, compensate its members, and bring diverse expertise to augment the leadership, owner, and/or company executive expertise.
SUPPLEMENTAL NEEDS TRUST - A special trust established for a person who is receiving or who may be receiving benefits under a welfare benefit program where the trust provides benefits that are over and above (supplemental to) the person’s basic needs for food, clothing, and shelter. The assets in a properly drafted supplemental needs trust will not affect the person’s eligibility for government benefits. This type of trust may or may not be the same as a special needs trust, depending on the respective terms
SURVIVORSHIP CLAUSE - A clause in a will requiring that the legatee survives for a specific period in order to inherit under the will. The bequest will qualify for the marital deduction if the property transfers to the surviving spouse and the time period of the survivorship clause is six months or less.
SWEETHEART WILL - Two wills executed by spouses that leave all assets to the other spouse.
TAKING AGAINST THE WILL - Surviving spouse’s election to receive a share of estate as determined by state spousal share laws rather than by decedent’s last will.
TANGIBLE PERSONAL PROPERTY - Property other than real estate that has inherent value and can be touched, such as jewelry, furniture, clothing, automobiles, boats, machinery, etc
TAX ACCOUNTING - Tax accounting is a structure of accounting methods focused on taxes rather than the appearance of public financial statements. Tax accounting is governed by the Internal Revenue Code, which dictates the specific rules that companies and individuals must follow when preparing their tax returns.
TAXABLE DISTRIBUTION - When a distribution is made from A trust to A skip person.
TAXABLE ESTATE - Once liabilities, charitable donations, funeral and administrative expenses, and transfers to spouse are deducted from the gross estate value, the remaining sum represents the estate’s net taxable estate.
TAXABLE TERMINATION - Termination of a property interest, triggered by a release of power, by death or by a lapse of time, held in a trust
TAX-APPOINTMENT CLAUSE - A clause in a will directing which assets will bear the payment of any debts and estate taxes.
T-BILL - A short-term U.S. government debt obligation backed by the Treasury Department with a maturity of one year or less.
TENANCY BY THE ENTIRETY - A joint tenants with right of survivorship that can only occur between a married couple.
TENANCY IN COMMON - An undivided interest in property held by two or more related or unrelated persons.
TERM INSURANCE - Insurance that provides coverage for a set period and builds no cash value. The premium generally increases with age.
TESTAMENTARY TRUST - A trust created after the death of the grantor. The grantor's will generally includes all of the trust provisions.
TESTATE - When a decedent dies with a valid will.
TESTATOR - Writer of a will.
THIRD PARTY SPECIAL NEEDS TRUST - Sometimes referred to as a family trust because the trust is a receptacle for funds from a parent, guardian or other family member. The assets of these trusts, if properly structured, are not counted or considered for purposes of available benefits for the beneficiary, thus making possible federal, state, and local funds.
TOTTEN TRUST - Not a trust, but rather a bank account with a beneficiary clause.
TRANSFER COSTS - Includes the gift and estate taxes and the costs of avoiding taxes, such as the cost of documents, planning, trusts, and other professional fees.
TRAVEL POLICIES - Travel Policies for families may include having specific requirements for what modes of transportation (private aviation vs. commercial) are acceptable for different travel purposes. Some families, for example, will not allow two trustees or key owners to fly together due to key person risk as a policy.
TREASURY BILL - A short-term U.S. government debt obligation backed by the Treasury Department with a maturity of one year or less.
TREASURY BOND (T-BOND) - A fixed-rate U.S. government debt securities with a maturity range between 10 and 30 years. It pays semiannual interest payments until maturity, when the face value of the bond is paid.
TREASURY INFLATION PROTECTED SECURITIES (TIPS) - A Treasury bond that is indexed to an inflationary gauge to protect investors from the decline in the purchasing power of their money. Value rises as inflation rises while the interest payment varies with the adjusted principal value of the bond.
TREASURY NOTE (T-NOTE) - A U.S. government debt security with a fixed interest rate and a maturity between one and 10 years.
TRUST - A structure used extensively in estate planning that vests legal title to assets in one party, the trustee, who manages those assets for the benefit of the beneficiaries of the trust.
TRUST ADMINISTRATION - The trustee’s management of trust property according to the trust document’s terms and for the benefit of the beneficiaries after the death of the settlor.
TRUST AGREEMENT - A trust agreement is a document that spells out the rules that you want followed for property held in trust for your beneficiaries. Common objectives for trusts are to reduce the estate tax liability, to protect property in your estate, and to avoid probate.
TRUST FUND - A trust fund is a legal entity that holds property or assets on behalf of another person, group or organization. It is an estate planning tool that keeps your assets in a trust managed by a neutral third party, or trustee. A trust fund can include money, property, stock, a business or a combination of these.
TRUST INSTRUMENT - The legal document (other than the Last Will) created by the grantor during life that contains all the provisions of the trust.
TRUST PROTECTOR - A person who is appointed to watch over a trust that will be in effect for a long time and ensure that it is not adversely affected by any changes in the law or circumstances.
TRUST RESIDENCY - The state in which the trust “lives,” which determines how the trust will be taxed. Also known as Trust Situs
TRUSTEE - The individual or entity responsible for managing the trust assets and carrying out the directions of the grantor that are formally expressed in the trust instrument.
TRUSTEED IRAS - A trust established within the United States that holds IRA assets, which is an alternative to a custodial IRA. It allows for ultimate control over the distribution of the IRA assets by the owner after his or her death and provides creditor protection for the beneficiaries.
TRUSTSCAPE - Coined by Hartley Goldstone, author of Family Trusts, A Guide for Beneficiaries, Trustees, Trust Protectors, and Trust Creators, a Trustscape is a subsystem of a larger family system. The Trustscape is populated by all those touched by trusts - the trust creator, the beneficiaries, the trustee, a trust protector, and a trust committee, and each of the cadres of legal, financial, accounting, and other advisors.
U.S. TREASURY OBLIGATIONS - Loans issued by the U.S. Treasury in the form of bills, notes, or bonds. Interest is taxed federally but exempt in every state.
UNAUTHORIZED PRACTICE OF LAW - The proffering of legal advice or services by one who is not a licensed attorney.
UNDER 65 TRUST - A “safe harbor” trust under the Medicaid laws, allowing a discretionary trust to be established for a person who is under the age of sixty-five and allowing the assets in such a trust to be ignored for Medicaid eligibility purposes, if the trust provides for reimbursement to the state on the death of the beneficiary
UNDIVIDED INTEREST - A share of property that has not been physically set aside or divided, such as a joint interest in a home or a tenancy in common in stocks
UNDUE INFLUENCE - Persuasion meant to overcome the judgement of another, such as flattery, trickery, or deception.
UNIFIED CREDIT - The credit that is given to a person, allowing him or her to gift up to a cumulative $11,580,000 tax-free to any one individual during the donor’s lifetime. This number does not include the gift tax annual exclusion or tuition payments or qualified medical expenses. This amount increases each year, indexed for inflation.
UNIFORM STATUTORY RULE AGAINST PERPETUITIES - A legislatively created alternative to the Common Law RAP that typically sets the perpetuities period at 90 years.
UNLIMITED MARITAL TRUST - A trust set up for the benefit of the surviving spouse, who receives the net income plus whatever principal he or she desires, and over which he or she may have a general power of appointment.
USUFRUCT - The temporary right to the use and enjoyment of another’s property.
VARIABLE UNIVERSAL LIFE INSURANCE - Similar to whole life insurance except you may invest cash value in the policy in mutual funds offered by the insurance company. The rate of return depends on success of those investments.
VARIANCE - A measurement in statistics of the spread between numbers in a data set, which measures how far each number in the set is from the mean and therefore from every other number in the set.
VERTICAL ANALYSIS - Analysis where each item is listed as a percentage. Reflects the change in percentage from year to year.
VOTING RIGHTS - the right of shareholders to vote on matters of corporate policy, including decisions on the makeup of the board of directors, issuing securities, initiating corporate actions and making substantial changes in the corporation's operations.
W-2 - Reports the employee's annual wages and the amount of taxes withheld from their paychecks.
WAR BOND - A form of government debt that seeks to raise capital from the public to fund war efforts
WEALTH PRESERVATION - The maintenance of income and assets.
WEALTH REPLACEMENT TRUST (WRT) - An irrevocable trust that owns and holds life insurance on its grantor's life. Also known as an Irrevocable Life Insurance Trust (ILIT).
WHOLE LIFE INSURANCE - A life insurance policy where the portion of premiums not used to purchase term life coverage is in ested by the insurance company, providing the policy owner with a stated rate of return.
WILL CONTEST - A formal objection under the law raised against the validity of a will, based on the contention that the will does not reflect the actual intent of the testator, that undue influence was asserted, the testator was not of sound mind, or that the will is otherwise invalid.
WINDFALL - An unexpected, unearned, or sudden gain or advantage.
WORKING CAPITAL - Working capital, also known as net working capital (NWC), is the difference between a company's current assets, such as cash, accounts receivable (customers' unpaid bills) and inventories of raw materials and finished goods, and its current liabilities, such as accounts payable.
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