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Glossary of Terms

   At Strange & Coats, P.C., we want to help you take control of you personal financial planning. We think this is online glossary of terms is a resource that may help--check back often!

Helpful glossary & definitions
   The purpose of the glossary is to provide definitions that you may be unfamiliar with. You'll notice that navigating is as easy as clicking on the alphabet.

   The terms are provided as a source to guide you in your research. Let us know if we've left out a term or definition you feel is important.


Accelerate Cost Recovery System (ACRS)
The method of cost recovery that provides for a higher charge in the earlier years and a declining periodic charge thereafter.

Accelerated depreciation
Writing off an asset so that the cost is recovered in the early years of the asset’s life.

Accrued interest
Interest that has been earned on a bond since the last interest payment was made.

Accumulated dividend
Dividends paid each year by an insurance company and left with the company to earn interest.

Active participation
If you make the decisions regarding the management of rental property you own, you are said to actively manage it.

Adjusted gross estate
An individual’s gross estate less allowable deductions for mortgages, bank loans, etc.

Adjusted Gross Income (AGI)
All income subject to tax less certain deductions permitted by law, such as in un-reimbursed business expenses, alimony, contributions to IRAs, etc. It is used as a basis for determining the amounts deductible for miscellaneous deductions, casualty or theft losses and medical expenses.

A person appointed by the court to supervise the handling of an individual’s estate in the event no will has been executed.

Alternative minimum tax
The alternative minimum tax is an additional tax that applies to individuals, trusts and estates with certain tax preference items. 

A.M. Best Company
A company that publishes a rating of insurance companies assessing financial strength and ability to pay claims.

Reducing the principal of a loan by regular payments.

he person who is covered by an annuity and who will normally receive the benefits of the annuity.

A contract between an insurance company and an individual in which the company agrees to provide income, which may be fixed or variable in amount, for a special period in exchange for a stipulated amount of money.

Anything owned that has monetary value.

Asset allocation
The process of determining what proportions of your portfolio holdings are to be invested in the various asset classes.

The person to whom the rights under a policy are transferred by means of an assignment.

A transfer of the ownership right of an insurance contract. In order to be valid when the claim is paid, any assignment must be filed in writing with the insurance company.

The person who transfers rights under an insurance policy.  

Automatic premium load
A provision that allows the company to use the policy’s cash value automatically to meet premium payments.


For tax purposes, the value used as the starting pint in figuring gain or loss, depreciation or depletion.

Bearer bond
A bond which does not have the owner’s name registered with the issuer and which is payable to the owner.

The party who receives proceeds under an insurance policy, trust or will.


Callable bond
A bond which may be redeemed under stated conditions by the issuing municipality or corporation prior to maturity. The term also applies to preferred shares which may be redeemed by the issuing municipality or corporation.

Capital asset
This term refers to any property, whether or not connected with a trade or business. A taxpayer’s household furnishings, personal residence and automobile are capital assets. Although gain on the sale of this kind of property is treated as capital gain, no loss is recognized for income tax purposes unless the property was held for the production of income.

Capital gains
Gain realized through the sale or exchange of capital assets, such as securities or real estate. They are classified as long term or short term, depending on the length of time the asset was held. Likewise, a capital loss may also be sustained from the sale of a capital asset.

Cash reserve
Money that is available to meet expenses that were not planned for in a budget. Commonly, the suggested level of cash reserve equals three to six months of cash expenses, but the size of a cash reserve can vary based on family income, job stability, current debts, amount of insurance deductibles and risk tolerance.

Cash surrender value
The amount of money payable to an investor in exchange for a life insurance policy or annuity that has not yet matured.

Cash value
The “savings element” in a permanent life insurance policy, which is the legal property of the policy owner.

Certificate of deposit
A time deposit with a specified maturity date.

Community property
Property owned “in common” (both persons owning it all) by a husband and wife that is acquired while residing in a community property state.

The willful withholding of information that  might materially affect insurability.

Cost recovery
Systematic method of spreading the cost of an asset over its expected useful life.

Coupon bond
A bond with interest coupons attached. Coupons are clipped as they come due and are presented to the issuer for payment.

Coupon rate
The specified interest rate or amount of interest paid on a bond.


A promissory note backed by the general credit of a company. Debentures are usually not backed by a mortgage or lien on any specific property.

A person who has died recently.

Decreasing term insurance
Term insurance coverage that decreases over the period of the contract, until the policy expires (for example, mortgage redemption insurance).

For 1999, a person is a dependent if the following conditions are met: (a). His or her gross income is less than $2,650. However, if the individual is a child of the taxpayer and is either a student or under 19, the $2,650 gross income rule waived. (b). Taxpayer supplies over one half of the support of the dependent; and
(c). The dependent is either a close relative of the taxpayer or has his principal place of abode with the taxpayer.

The allocation of the cost of a fixed asset over a period of time. 

The refusal, rejection or renunciation of a claim, power or property.

Discount bond
A bond that is sold for less than its face amount of principal.

Discretionary income
The difference between income and expenses. It is money you have to invest to help you reach your financial goals.

Accumulation of different securities to reduce the risk of loss.

Return of premium, on a participating policy.

Dividend reinvestment plan
A plan that permits stockholders to have cash dividends reinvested in the corporation’s stock.

Dollar cost averaging
Investing a fixed dollar amount at regular intervals. When prices are low, your investment purchases more shares. When prices rise, you purchase fewer shares. Over time, the average cost of your shares will usually be lower than the average price of those shares. Such a plan doesn’t assure a profit and does not protect against losses in a declining market. However, over longer periods of time it can be an effective means of accumulating shares. The investor should consider his or her ability to continue investing through periods of low market prices.

An individual’s permanent home.


Endowment insurance
A permanent life insurance policy that offers death protection for specified period of time. If the insured lives past the period specified, the contract pays the face amount of the policy of the insured. 

Value of a person’s ownership in real property or securities. For instance, current market value of a home, less principal remaining on its mortgage, is the equity of that property.

Estate tax
A tax paid on property that is owned at an individual’s death. The tax is paid on the property as a whole before it is distributed.

Estate tax balance sheet
A summary of all property that an individual has an interest in at his or her death (our term for the Federal Estate Tax Return, Form 706). 

An individual appointed through a will to administer and distribute property upon the testator’s death.


Face amount
The amount indicated on the face of the policy that will be paid at death or when the policy matures. 

An individual who manages property or acts for another individual and is placed in a position of trust.

Form W4
An employee’s withholding allowance certificate. The form is filed with the employer so that the employer can withhold federal income tax from pay. Form W
4 remains in effect until the employee changes it. By correctly completing this form, the employee can match the amount of tax withheld from wages to his or her tax liability.


Any willing transfer of money or property without payment. There must be a showing of “detached and disinterested generosity.”

Gift tax
A tax imposed on the transfer of money or property through gifts made by an individual.

Government obligations
Instruments of the U.S. government public debt. Examples are Treasury bills, notes, bonds, savings bonds and retirement plan bonds. These are fully backed by the U.S. government. 

A person who makes a gift. 

Gross income
All income received by the taxpayer from any source, unless exempt from tax. It includes gains, salaries, bonuses, fees, profits, interest, rents, dividends, etc. 

Gross death benefit
The face value of an insurance policy before the reduction for policy loans.

Gross estate
All assets, including personal, business and investment assets, retirement benefits and life insurance that are owned by a person at the time of death, before being reduced by payment of estate settlement expenses. 

Guaranteed insurability rider
A rider that permits the policyholder to purchase additional amounts of insurance at stated intervals without proof of insurability.

Guaranteed renewable
A contract provision that permits the insured to keep a policy in force. With the exception of premium increases, no changes in the contract may be made.

An individual who has the legal right and duty to take care of another person or his or her property because that person cannot legally take care of himself or herself.


Refers to individuals who lack the ability or legal right to manage their own affairs. 

Incontestable clause
A provision that states that after a policy has been in force for a certain length of time (generally two years) the insurer cannot deny a claim, unless the premium has not been paid. 

To compensate or reimburse an individual for possible losses of a particular type. 

Inflation guard endorsement
A provision in a homeowner’s contract that allows for periodic increases in the amount of coverage. 

Inflation risk
The risk created by the reduced purchasing power of the dollar; your dollar will purchase fewer goods in the future than it will today.

Inheritance tax
A tax on money or property that an individual inherits.

Intangible drilling costs
An operator’s expense for wages, fuel, repairs, hauling and supplies incurred in the preparation and drilling of oil and gas wells.

Inter vivos
Between the living; from one living person to another.

Dying without having made a valid will. 

Investment company
A company or trust that uses its capital to invest in other companies. There are two types of investment companies: closed end and open end.

Irrevocable trust
A trust that cannot be changed, altered or revoked.

The condition of the proposed insured such as age, occupation, health, etc., that makes him or her an acceptable risk.

Itemized deductions
Deductions from adjusted gross income for various taxes, interest paid, charitable contributions and miscellaneous. If a taxpayer’s deductions are less that the standard deductions, the taxpayer uses the standard deductions. Otherwise, the taxpayer uses his or her total itemized deductions.


Joint life and survivorship annuity
Periodic payments that are made to two beneficiaries. At the death of the first beneficiary, the survivor will continue to receive payments.

Joint ownership
Ownership of property by more than one person.

Joint tenancy
A form of co-ownership that provides that each joint tenant has undivided interest in the whole property. When one joint tenant dies, this interest passes to the surviving joint tenant or tenants. The last surviving joint tenant obtains title to the entire property.


Keogh plan
Retirement plan available for self-employed individuals.


When a life insurance policy is no longer in force.

Legal age
The age at which an individual becomes old enough to make a contract, generally 18 to 21 in most states.

A person who inherits property by will.

Debts or anything owed to another person or party. Liabilities include credit card balances, mortgages, auto loans, etc.

Life estate
A property right, the duration of which is limited to the life of a person holding it.

Load fund
A mutual fund that charges a sales fee for buying or selling shares.

Loan value
The amount of cash value that may be borrowed bye the insured.

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