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Living trust
A trust that is established while the grantor is still alive. Compare to testamentary trust.
Trusts for Children
You can set up a trust for your children, too. The terms of the trust can specify which of the children's expenses to pay and under what circumstances.
Beneficiary
The person who receives the benefits or gifts from an estate, insurance policy, IRA, pension plan, or trust.
Trustee
The person who receives legal title to the assets in the trust but is legally obligated to hold, manage, and invest the trust assets for the benefit of the beneficiaries. The trustee's duties are set by the trust agreement and by law.
Diversification
Holding several investments that have different risks. The concept of "Don't put all your eggs in one basket." The chance that a single stock or other investment will lose money is offset by the chances of your other stocks and investments making money.
Asset Allocation
When you divide your money among various types of investments, such as stocks, bonds, and short-term investments (also known as "instruments"), you are allocating your assets. The way in which your money is divided is called your asset allocation.
Foreign Bank Accounts
There is a thriving industry of offshore practitioners advising U.S. citizens to set up offshore bank accounts.
Real estate investment trust (REIT)
A type of investment that pools the money of many individuals and acquires real estate or mortgages that are then owned proportionally by each investor.
Municipal bond
An investment security for which a state or local government promises to pay an amount at maturity (usually more than five years in the future) with interest, in return for a current investment. Municipal bonds are generally tax-free, but not always.
Tax-deferred earnings (investments)
Earnings on which taxes are not paid until a future date, usually when funds are withdrawn. The TSP and traditional IRAs are examples of vehicles that offer tax-deferred earnings.
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