Financial Planning Glossary

Adjusted Basis: the basing of a certain asset that has been adjusted for certain things like additions and improvements, depreciation, returns of capital or stock splits

Administrative expenses: expenses that have to do with attorney fees, executor fees, the filing of documents in court, funeral expenses, taxes and other such fees

After-tax rate of return: the payments received from an investment once income taxes have been deducted and tax credits have been added in; can be calculated by multiplying the investment yield by the marginal tax rate minus one

Annuitize: to crate an income stream through regular payments on an annuity contract

Annuity: a type of financial contract that provides for regular payments

Basis: the starting cost of any asset

Beneficiary: the person who is legally entitled, usually by designation, to receive any funds pertaining to retirement, annuity or insurance policies. May also be used to refer to the person who is receiving the remainder of an asset or estate

Bond: evidence of a debt

Cash flow: a measurement of money that comes in and out of an account during a specified period of time

Cash surrender value (CSV): term used to indicate money that has resulted from a life insurance policy; term life policies have none

Casualty: damage, loss or destruction occurring from an unexpected occurrence

Charitable gift: money donated to qualified organizations; people may make charitable gifts tax-free 

Charitable remainder trust: the term for a t rust that must pay income to be named the beneficiary for a set period of time or for their lifetime, at which time assets are transferred to the charity

Codicil: any addition to a will that is used to explain, change, or qualify other parts of the will

Community property: property that is acquired during a marriage, which is considered mutually owned by both parties

Debtor: any person or business that owes money to another person or business

Defined benefit plan: a retirement plan that contains a specific benefit at the time of retirement

Defined contribution plan: a plan for retirement that lays out the schedule for contributions to the retirement fund, either by the employer, the employee or both

Discretionary expenses: living expenses that are not necessary for basic subsistence.

Emergency Fund: three to six times the monthly cost of living; a cushion for unexpected occurrences

ERISA: the Employee Retirement Income Security Act of 1974 in which the federal guidelines regarding benefits and pensions were set

Estate settlement costs: all of the debts and expenses that must be paid after a person’s death

Gift tax annual exclusion: the amount of money any person can give without the federal gift tax

Holding: any investment that is found within an asset account

Human life value: the act of making a determination about the amount of life insurance that would be needed to replace what a person would contribute in the event of their death

Installment sale: the sale of any asset in which payments are made with interest

Interest fee loan: a loan that requires a person to pay back only the amount that they have borrowed

Intestate: dying without a legitimate will

Joint tenancy: ownership of any property by more than one person

Lifestyle assets: things that are bought for use or enjoyment that don’t usually create income, such as a boat or a house

Line of credit: a loan of a specific amount of money

Liquid assets: cash or assets that can be converted to cash without losing value

Marginal tax bracket: the range of income that is taxed at a certain rate

Plan administrator: the person who has been designated to oversee a retirement plan or benefit plan

Principal: the actual amount of money that has been financed, invested or borrowed

Probate fees: fees that are a part of the value of the estate

Qualified state tuition plan: a plan that allows for the purchase of tuition credits in advance for qualified educational costs

Rate of return: a measure of the amount any investment earns; usually expressed as a percentage

Realized gains and losses: profit or loss that results from the selling of or exchanging of property or assets

Risk management: the use of a strategy to minimize the impact of loss on finances

Severance pay: the money an employer pays to an employee upon layoff

Skilled nursing care: a type of care provided by skilled medical personnel

Spousal IRA: a retirement savings plan for any unemployed spouse or the spouse that earns less money

Tax deferred: income tax that is levied only when the account matures or funds are withdrawn

Taxable assets: assets that are subject to taxation

Testator: a person who has died and left a will behind

Term life insurance: a life insurance policy that pays during a specific time period