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Twelve Months of Financial Milestones Working with Financial and Legal Advisors |
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GLOSSARY OF fINANCIAL tERMS A B C D E F G H I J K L M N O P Q R S T U V W X Y Z 529 College Savings Plan - A tax-advantaged college savings plan. Administrator - A person appointed by the probate court to manage an estate during probate when a person has died without a will. Annuity - Issued by an insurance company and purchased to accumulate funds for retirement. It is also used to pay an income for a specified number of years in a specified amount, or for the rest of the annuitant’s life. Other annuities provide income in exchange for money or another asset. Asset - Any item that adds value to your loved one’s estate or your personal financial situation, such as a house, car, bank accounts, and stocks. Asset Allocation - The process of deciding how to divide your investments among different categories of financial assets, including stocks, bonds, and cash. Attorney - A representative. Often used to identify a lawyer, who is an attorney at law. A personal attorney may be any competent adult who is given authority to act on another’s behalf. Beneficiary - A person or organization who receives the benefits from a trust, bank account, investment, life insurance policy, or retirement plan. Bond - A written pledge of a company or government group to repay principal and interest to a bondholder. Brokerage - A firm that employs brokers. Cash Flow - The amount of money that comes in every month (income) and the amount of money that goes out (expenses). Charitable Trust - A trust set up to benefit a charity. The donor can receive income from the trust until their death and remaining funds go to the charity. COBRA - Consolidated Omnibus Budget Reconciliation Act of 1985. A federal law that permits health insurance purchased through an employer to be continued for up to 36 months after a worker has died or been laid off. Coverdell Education Savings Account - A tax-advantaged savings plan that can be used to pay for kindergarten through 12th grade expenses as well as college expenses. Creditor - A person or business to whom money is owed. Death Benefits - Money that is received upon the death of another person. Disclaimer - The refusal to accept a gift, bequest, property, or other right from an estate or trust for tax or financial planning reasons. Estate - Everything a person owns. Estate Tax - Taxes that are payable to the federal government or the state when assets are transferred at a person’s death to someone other than his or her spouse. Generally affects only large estates. Executor - The person named in a will to manage an estate during probate. Fair Market Value - A reasonable value established between a knowledgeable buyer and willing seller. Grantor - The person who creates and funds a trust. Individual Retirement Account (IRA) - Money set aside for retirement in a tax-deferred account. It is not taxed until used at retirement. Insurance Broker - A person licensed to sell insurance from a number of different companies. Intestate - A person who died without leaving a will. This person’s estate is distributed by the laws of the state where the person lived. Inventory - A complete list of a person’s property and belongings. The fair market value of each item usually is listed also. Joint Tenants with Rights of Survivorship - A way of holding property. Often, both spouses are named as owners. Accounts held jointly in this way automatically belong to the survivor after the death of one person. These properties do not need to go through probate. Letters of Instruction - Letters, usually kept with a will, that state a person’s wishes about burial and about dividing personal property among the survivors. Liabilities - Any debts that reduce the value of your loved one’s estate or your personal financial situation, such as a mortgage loan, car loan, credit card bills, and medical expenses. Mutual Fund - A type of investment. The fund itself holds many securities, such as stocks and bonds. Net Worth - The total value of all assets minus all liabilities. Often used by banks and brokerage firms to evaluate a person’s overall financial strength and ability to qualify for a loan or investment. Personal Representative - Another name for an executor. Petition - A formal request made by a lawyer to a court. Post a Bond - To put a large sum of money with the probate court as a guarantee that an estate will be managed carefully. Sometimes an administrator is asked to post a bond. Powers of Appointment - The right to determine who will receive property over which the powers apply. Probate - The legal process that determines if a will is legally valid and administers an estate until the property is distributed. Probate Court - The court that oversees the process of probate. It also appoints guardians for children under the age of 18, if needed. The probate court is in the same county where the person lived. Proceeds - The total amount derived from a financial transaction. Life insurance policies are often said to pay proceeds to a beneficiary. Also called death benefits. Real Estate - Land (as opposed to buildings that may sit on the land). Roth IRA - A tax-advantaged savings plan that permits withdrawal of contributions, without penalty, to pay for college. Sealed (as a bank safe deposit box) - A bank may be required to “seal” a safe deposit box when it is notified of the death of the box owner. No one can put things in or take things out of the box without the approval of the probate court. The box is unsealed when the estate is settled. Securities - Typically stocks, which indicate ownership in a company; bonds, which represent a loan made to a company or government entity; and mutual funds, which may own a combination of stocks and/or bonds. Settling an Estate - The process of paying a decedent’s debts and taxes and dividing his or her estate among survivors according to the laws of the state where the person lived. Settlement Options - Choices as to how death benefits from a life insurance policy will be paid. Stockbroker - A person who is licensed to buy and sell stocks and other securities. Testate - A person who died who had a will. Testator - Decedent who created a trust through his or her will. Uniform Gifts to Minors
Act (UGMA)/ Will - A legal document that says how a person wishes his or her estate to be divided among survivors. A will also should say who will take care of children under age 18.
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