Your Finance Glossary

Alternative assets are investments that fall outside standard categories; can include private equity, collectibles, real estate, and more.

An appreciating asset is an asset that gains value over time.

A depreciating asset is an asset that loses value over time.

Equity is ownership interest in an asset after liabilities are deducted.

An opportunity zone is a lower-income area designated by the Tax Cuts and Jobs Act of 2017 that offers tax advantages — including deferral and potential exclusion of capital gains — to investors who place capital in those areas.

A portfolio is the collection of assets held by an investor or financial institution.

Real estate holdings are property that an investor owns directly or through a secondhand entity.

A vesting schedule is an investment schedule that dictates when a shareholder will gain ownership over assets.

A beneficiary is the designated inheritor of assets who are legally set to gain ownership of them in the event of the owner’s passing.

An estate plan is the arranged plan for the transfer of assets to beneficiaries at the time of the owner’s passing.

Estate tax or inheritance tax is the percentage of taxable assets that a beneficiary must claim.

An executor is the person designated to follow through on the wishes of the deceased, which are designated in their will.

A fiduciary is a person or entity with a legal and ethical obligation to manage someone else’s assets in that person’s best interest.

A grantor is an individual or entity with the power to create a trust and place assets in that trust.

A last will and testament is the document that spells out an individual’s wishes for the distribution of their assets after death.

A legacy contact is the person you choose to have access to your critical accounts and information in the event of your death.

Legacy planning is the act of organizing and preparing your estate for its eventual transfer to your beneficiaries.

A living trust or revocable trust is a legal document created during your lifetime that holds your assets and directs their distribution to beneficiaries upon your death, without going through the probate process.

A medical directive is the legal document that specifies what kind of life-preserving measures you consent to receiving in the event you lose consciousness.

Power of attorney is a legal document that allows someone to act on your behalf in financial and medical matters, in the event you’re unable to make decisions of your own.

Probate is the process of transferring assets to a beneficiary.

A successor trustee is the designated person who becomes responsible for settling a trust after the grantor dies or loses the ability to carry out the responsibility.

The 1031 tax exchange is a real estate investment strategy that allows investors to defer capital gains taxes by exchanging one like-kind investment property for another.

The 1202 gain exclusion is an IRS code that allows investors to exclude up to 100% of capital gains from the sale of qualified small business C corporation stock from their federal taxes, incentivizing investment in small businesses.

A balance sheet is a financial statement that details a business’ assets, liabilities, and shareholder equity.

A business entity is a legally recognized organization, including corporation, association, partnership, and more.

Capital gains are the increase of an asset’s value beyond its original purchase price.

Depreciation is the decrease of an asset’s value over time.

An EIN (Employer Identification Number) is the number assigned to legal entities by the IRS, which identifies them and carries their tax record.

An income statement, or Profit & Loss Statement, is a document detailing a business’ financial gains and losses over a specified duration.

A pass-through entity is a legal business entity that is not responsible for corporate income tax because its owner receives the profits.

An S-corporation is a corporate business entity that passes its gains and losses onto its owner or shareholders, who report it on their income tax, reducing the corporation’s tax burden.

A tax-advantaged account is an account that offers tax benefits (deferral or exemption) to people when they save up for specific goals.

A Certified Financial Planner (CFP) is an accredited financial planner who has received rigorous education and training.

A Certified Public Accountant (CPA) is an accredited accountant who has received rigorous education and training.

A financial advisor is a professional who advises people on a variety of money-related matters.

A financial statement is a document detailing assets, liabilities, and more.

A personal financial statement is a picture of your financial standing at any given time, which lists your assets, liabilities, and more.

An umbrella policy is an insurance policy that offers extra liability coverage beyond the typical limits of your insurance plan.

Compound interest or compound growth is what you gain on both the sum you’ve invested and the interest you’ve earned on it.

Diversification is the act of adding a variety of asset types to your financial portfolio with the intention of strengthening it.

Generational wealth is the passage of wealth and financial security from one generation to the next.

A high-net-worth individual (HNWI) is a person who possesses assets that surpass a certain threshold.

Inflation is the increase in the price of common goods and services.

Liabilities are the debts and obligations that deduct from your net worth.

Liquidity is the measure of how easily it is to convert an asset into cash.

Net worth is your total assets minus your total liabilities.

Risk tolerance is your level of comfort in investing and risking the loss of assets.

Sudden wealth syndrome is the experience of anxiety and overwhelm after receiving a large sum of money through inheritance, the selling of a business, etc.

Wealth transfer is the shift of wealth from one party to another or one generation to another.

A windfall is the experience of suddenly gaining a large sum of money through inheritance or other means.