The Olomon Financial Glossary

Alternative assets are investments outside the traditional categories of public stocks, bonds, and cash — including private equity, hedge funds, real estate, private credit, collectibles, and crypto.

An appreciating asset is property whose market value is expected to rise over time, increasing the owner's net worth as it is held.

A depreciating asset is property whose market or book value declines over time due to wear, obsolescence, or market forces.

Equity is the residual ownership value in an asset after all related liabilities are subtracted — for example, a home's market value minus the outstanding mortgage.

An Opportunity Zone is an economically distressed census tract designated under the Tax Cuts and Jobs Act of 2017 in which investors can defer or eliminate certain capital gains taxes by investing through a Qualified Opportunity Fund.

A portfolio is the full collection of investable assets — stocks, bonds, funds, real estate, alternatives, and cash — held by an individual, household, or institution.

Real estate holdings are the physical properties an investor owns directly or through entities such as LLCs, partnerships, or REITs — including primary residences, rentals, commercial buildings, and undeveloped land.

A vesting schedule is the timetable that determines when an employee gains full ownership of equity, retirement contributions, or other deferred compensation granted by an employer.

A beneficiary is a person, trust, or organization legally designated to receive assets — such as life insurance proceeds, retirement accounts, or trust distributions — upon the owner's death or another triggering event.

An estate plan is the coordinated set of legal documents — typically including a will, trust, powers of attorney, and beneficiary designations — that directs how a person's assets, dependents, and medical decisions are handled at incapacity or death.

Estate tax is a federal or state tax on the transfer of a deceased person's net estate; inheritance tax is a state-level tax on the assets a specific beneficiary receives. The two are distinct and apply differently by jurisdiction.

An executor is the person or institution named in a will and confirmed by a probate court to administer the deceased's estate — paying debts, filing taxes, and distributing assets to beneficiaries.

A fiduciary is a person or institution legally bound to act in another party's best interest — placing the client's interests above their own, with duties of loyalty, care, and full disclosure.

A grantor (also called a settlor or trustor) is the person who creates a trust by transferring assets into it and defining the rules for how those assets are managed and distributed.

A last will and testament is a legal document in which a person directs how their probate assets should be distributed, names guardians for minor children, and appoints an executor to administer the estate.

A legacy contact is a person you authorize in advance to access designated digital accounts, financial records, or platforms after your death or incapacity — without granting full account control.

Legacy planning is the broader practice of organizing financial, legal, and personal information so that the values, intentions, and resources of one generation can be transferred to the next with clarity.

A revocable living trust is a legal entity created during your lifetime to hold ownership of your assets, allowing them to bypass probate and pass directly to named beneficiaries while remaining fully editable while you're alive.

A medical directive (also called an advance directive or living will) is a legal document that records your healthcare wishes — including life-sustaining treatment, resuscitation, and end-of-life care — for use if you cannot communicate them yourself.

A power of attorney (POA) is a legal document granting one person — the agent or attorney-in-fact — the authority to act on another person's behalf in financial or medical matters, with scope and duration set by the principal.

Probate is the court-supervised legal process of validating a deceased person's will, paying their debts and taxes, and transferring titled assets to heirs and beneficiaries.

A successor trustee is the person or institution that takes over management and distribution of a trust if the original trustee dies, resigns, or becomes incapacitated.

A 1031 exchange (named after Internal Revenue Code §1031) is a tax-deferral strategy that lets real estate investors postpone capital gains taxes by reinvesting the proceeds from the sale of an investment property into a like-kind replacement property within strict IRS deadlines.

The 1202 gain exclusion is a provision of Internal Revenue Code §1202 that allows investors in Qualified Small Business Stock (QSBS) to exclude up to 100% of eligible capital gains — generally up to $10 million or 10× basis — from federal income tax when holding requirements are met.

A balance sheet is a financial statement that lists what an entity owns (assets), what it owes (liabilities), and the residual equity at a single point in time — following the equation Assets = Liabilities + Equity.

A business entity is a legally recognized organization formed to conduct commercial activity — such as a sole proprietorship, partnership, LLC, S-corporation, or C-corporation — each with distinct liability, tax, and governance treatment.

Capital gains are the profits realized when a capital asset — such as stock, real estate, or a business interest — is sold for more than its adjusted cost basis. They are taxed as short-term (≤1 year) or long-term (>1 year) at different federal rates.

Depreciation is the accounting and tax method of allocating the cost of a tangible asset across its useful life, recognizing the asset's loss of value as a non-cash expense and, where allowed, as a tax deduction.

An Employer Identification Number (EIN) is a nine-digit federal tax ID issued by the IRS to identify business entities, trusts, and estates for tax filings, banking, and payroll.

An income statement, also called a profit and loss (P&L) statement, summarizes revenues, costs, and expenses over a defined period to show net profit or loss — answering the question “did the entity make money?”

A pass-through entity is a business structure — including sole proprietorships, partnerships, S-corporations, and most LLCs — that does not pay federal income tax at the entity level. Profits and losses flow through to owners' personal returns.

An S-corporation is a corporation that has elected, by filing IRS Form 2553, to pass corporate income, losses, deductions, and credits through to its shareholders for federal tax purposes — avoiding the double taxation of a C-corporation.

A tax-advantaged account is an investment or savings account that receives favorable federal tax treatment — through tax deferral, tax-free growth, or up-front deductions — to encourage long-term saving for goals like retirement, education, or healthcare.

A Certified Financial Planner (CFP®) is a credentialed financial-planning professional who has met the education, examination, experience, and ethics requirements of the CFP Board and is held to a fiduciary duty when providing financial advice.

A Certified Public Accountant (CPA) is a state-licensed accounting professional who has passed the Uniform CPA Examination and met experience and continuing-education requirements to provide audit, tax, and advisory services.

A financial advisor is a professional who helps individuals or institutions plan, invest, and manage money — a broad term that may include CFP® professionals, investment advisers, brokers, insurance agents, and wealth managers, with widely varying credentials and standards of care.

A financial statement is a formal record of an entity's financial activity — typically including a balance sheet, income statement, and cash flow statement — used to evaluate financial position, performance, and liquidity.

A personal financial statement is a document summarizing an individual or household's assets, liabilities, and net worth at a specific point in time — used by lenders, advisors, and the household itself to evaluate financial position.

An umbrella policy is a personal liability insurance policy that provides coverage above the limits of underlying auto, homeowners, and watercraft policies — designed to protect significant assets against large lawsuits and judgments.

Compound interest is interest calculated on both the original principal and the accumulated interest from prior periods, causing wealth to grow at an accelerating rate over time.

Diversification is the investment practice of spreading capital across many different assets, sectors, and geographies so that the poor performance of any single position has a limited impact on the overall portfolio.

Generational wealth is the financial assets, business interests, real estate, and intellectual capital that one generation passes to the next, intended to provide ongoing economic opportunity and stability for descendants.

A high-net-worth individual (HNWI) is a person whose investable assets exceed a defined threshold — most commonly $1 million in liquid assets, with very-high-net-worth (VHNWI) at $5 million and ultra-high-net-worth (UHNWI) at $30 million.

Inflation is the sustained rise in the general price level of goods and services, which reduces the purchasing power of each unit of currency over time.

Liabilities are present obligations that an individual or entity owes to others — including mortgages, loans, credit-card balances, accrued taxes, and contractual commitments — that are subtracted from assets to determine net worth.

Liquidity is the ease and speed with which an asset can be converted into cash without significantly affecting its market price — a key driver of financial flexibility and risk capacity.

Net worth is the difference between everything you own (assets) and everything you owe (liabilities). It is the single most important measure of household financial position at a point in time.

Risk tolerance is the degree of investment volatility and potential loss an investor is willing and financially able to endure in pursuit of higher long-term returns.

Sudden wealth syndrome is a recognized cluster of psychological responses — including anxiety, guilt, isolation, and impaired decision-making — that can follow a sudden, large financial windfall such as an inheritance, IPO, or business sale.

Wealth transfer is the planned or unplanned movement of financial, real, and intangible assets from one party to another — typically across generations or to charitable beneficiaries — through gifts, inheritance, trusts, or business succession.

A windfall is a sudden, often unexpected gain of a large sum of money — for example through inheritance, a legal settlement, a business sale, or a lottery win — typically requiring deliberate planning to convert into long-term wealth.