Glossary for Attorneys

1. 1031 Exchange – A tax-deferred exchange allowing real estate investors to defer capital gains by reinvesting proceeds into another like-kind property.
2. 1099 Income – Compensation reported on Form 1099 for independent contractors rather than W-2 employees.
3. 401(k) Plan – An employer-sponsored retirement plan allowing pre-tax (or Roth) contributions to tax-deferred investment accounts.
4. Accredited Investor – A person meeting income ($200K single, $300K joint) or net worth ($1M+) thresholds to invest in certain private securities.
5. Active Income – Earned from labor or services—including salaries, legal fees, or consulting income.
6. Adjustable-Rate Mortgage (ARM) – A mortgage with interest rates that fluctuate based on an index.
7. After-Tax Return – The net return on an investment after taxes have been deducted.
8. Aggressive Growth Fund – A mutual fund seeking high long-term growth through riskier stocks.
9. Alternative Investments – Nontraditional investment options such as private equity, hedge funds, or real estate syndications.
10. Amortization – The scheduled gradual repayment of a loan balance over time.
11. Angel Investor – Provides early-stage capital to startups, typically in exchange for equity.
12. Annual Percentage Rate (APR) – The yearly cost of borrowing including fees and interest.
13. Annual Report – A company’s yearly financial performance filing for investors.
14. Annuity – An insurance product providing guaranteed periodic payments.
15. Appreciated Asset – An asset whose value has increased since purchase.
16. Asset Allocation – Dividing investments among asset classes (stocks, bonds, cash).
17. Asset Protection Trust – Helps shield assets from litigation and creditor claims.
18. Asset-Based Lending – Loans secured by collateral—such as accounts receivable or property.
19. Audit – Formal examination of financial statements for accuracy and compliance.
20. Automatic Rebalancing – Adjusting a portfolio back to target allocations over time.

Tax & Income Planning

21. Basis – The original value of an asset used to determine taxable gain.
22. Bonus Depreciation – Allows accelerated depreciation deduction for eligible assets.
23. Capital Gain – Profit realized when an asset sells above its cost basis.
24. Capital Loss – Loss realized when an asset sells below basis.
25. Carryforward – A tax loss or credit allowed to apply in future tax years.
26. Charitable Deduction – Tax reduction for qualifying donations.
27. Charitable Lead Trust – Pays income to charity for a period before transferring assets to beneficiaries.
28. Charitable Remainder Trust – Allows donor to receive income while leaving remainder to charity.
29. Child Tax Credit – Federal tax benefit for qualifying dependent children.
30. Cost Segregation Study – Engineering analysis to accelerate depreciation on real estate.
31. Deferred Compensation – Income paid in the future for services rendered today.
32. Depreciation – Deduction for asset wear and tear over time.
33. Earned Income – Income received for work performed.
34. Estimated Taxes – Quarterly payments for individuals not fully withheld by W-2 income.
35. Excess Contribution Penalty – Tax penalty for contributing above retirement plan limits.
36. Excise Tax – Federal tax on specific goods (e.g., fuel, tobacco).
37. Exemption Trust – Used to reduce estate taxes and shelter assets.
38. Federal Funds Rate – Interest rate banks charge each other for overnight loans.
39. Fiduciary – Legal obligation to act solely in another’s best interest.
40. Filing Status – Category (single, married, etc.) used to determine tax rates.

Estate & Wealth Transfer

41. Generation-Skipping Transfer Tax – Tax applied to transfers skipping a generation.
42. Gift Splitting – Combined gifting by spouses up to annual exclusion limits.
43. Grantor Trust – Trust where grantor retains control and tax responsibility.
44. Guardianship – Court appointment for individuals unable to manage themselves.
45. Heir – Person legally entitled to inherit when no will exists.
46. High-Net-Worth Individual (HNWI) – Household with significant investable assets, typically $1M+.
47. Homestead Exemption – Protects equity in a primary home from creditors.
48. Intestate – Dying without a valid will.
49. Irrevocable Life Insurance Trust (ILIT) – Holds life insurance outside taxable estate.
50. Joint Tenancy – Property shared with right of survivorship.
51. Legacy Planning – Strategy for transferring wealth and values.
52. Letters Testamentary – Court authorization granting estate management authority.
53. Living Trust – Trust created during life to manage and distribute assets.
54. Marital Deduction – Unlimited tax-free asset transfer to a spouse.
55. Minority Discount – Lower business valuation for lack of control or liquidity.
56. Multigenerational Trust – Designed to preserve wealth beyond immediate heirs.
57. Per Stirpes – Estate distribution method passing shares to descendants of a deceased heir.
58. Probate – Court-supervised estate settlement after death.
59. Qualified Personal Residence Trust – Removes a home from estate while retaining occupancy rights.
60. Step-Up in Basis – Resets asset basis to market value at death.

Retirement & Benefits

61. Actuary – Professional calculating pension and insurance risks.
62. Beneficiary – Person designated to receive plan or insurance proceeds.
63. Catch-Up Contribution – Extra retirement contributions allowed for age 50+.
64. Defined Benefit Plan – Pension providing guaranteed lifetime income.
65. Defined Contribution Plan – Contribution-based retirement plan with investment control.
66. Employer Match – Employer’s contribution to employee retirement accounts.
67. Fiduciary Rule – Government rule requiring advisors to act in client’s best interest.
68. Hardship Withdrawal – Penalty-eligible early retirement account withdrawal.
69. Highly Compensated Employee – IRS designation impacting plan discrimination rules.
70. Lifetime Income Rider – Feature guaranteeing annuity payments for life.
71. Minimum Required Distribution – Mandatory withdrawal at age 73 from qualified plans.
72. Nonqualified Deferred Compensation – Promises future payments outside ERISA rules.
73. Pension Benefit Guaranty Corporation – Federal insurer of private pensions.
74. Plan Administrator – Person or company managing plan compliance.
75. Rollover – Tax-deferred transfer between retirement accounts.
76. Roth 401(k) – After-tax contributions with tax-free withdrawals.
77. Safe Harbor 401(k) – Employer-funded plan automatically passing IRS testing.
78. SEP IRA – Simplified plan for self-employed or small practices.
79. SIMPLE IRA – Low-cost retirement plan for smaller businesses.
80. Solo 401(k) – Retirement plan for self-employed with no employees.

Investing & Markets

81. Alpha – Investment return above market benchmark.
82. Asset Class – Category of investments (stocks, bonds, real estate, etc.).
83. Bear Market – Market decline of 20% or more.
84. Benchmark – Standard index used to evaluate performance.
85. Beta – Measure of volatility relative to the market.
86. Bond Ladder – Strategy using bonds with staggered maturities.
87. Buy and Hold Strategy – Long-term investment approach avoiding frequent trading.
88. Capital Structure – Mix of company debt and equity.
89. Closed-End Fund – Limited-share investment fund traded on exchanges.
90. Collateralized Loan Obligation – Security backed by diversified loans.
91. Correlation – Degree two assets move together.
92. Derivative – Contract deriving value from another asset.
93. Diversification – Strategy to reduce risk through varied investments.
94. Dollar-Cost Averaging – Investing fixed amounts at regular intervals.
95. Duration – Measure of interest rate sensitivity for bonds.
96. Emerging Markets – Developing global economies offering investment opportunity and risk.
97. Equity – Ownership stake in an asset or company.
98. ETF (Exchange-Traded Fund) – Security tracking an index or asset basket.
99. Fixed Income – Investments generating predictable interest payments.
100. Growth Stock – Company expected to grow faster than market.
101. Hedge Fund – Private fund using nontraditional strategies and leverage.
102. Index Fund – Passively tracks a market index.
103. Liquidity – Ability to convert assets to cash quickly.
104. Market Capitalization – Company value (shares outstanding × share price).
105. Mutual Fund – Pooled investment managed by professionals.
106. Price-Earnings Ratio – Stock valuation comparing price to earnings.
107. Private Credit – Non-bank lending to companies or projects.
108. Private Equity – Investment in nonpublic companies.
109. Real Estate Investment Trust – Company owning income-producing real estate.
110. Risk Tolerance – Investor’s comfort with market fluctuations.
111. Sharpe Ratio – Risk-adjusted performance metric.
112. Short Selling – Betting on asset price declines.
113. Sovereign Bond – Debt issued by a national government.
114. Stock Buyback – Company repurchasing its own shares.
115. Volatility – Measure of price fluctuation over time.

Business, Partnership & Law Firm Operations

116. Accounts Receivable Financing – Borrowing against client invoices.
117. Business Continuity Plan – Strategy to maintain operations in disruption.
118. Business Interruption Insurance – Protects revenue loss from covered events.
119. Capital Account – Tracks partner equity contribution and withdrawal.
120. Client Retainer – Advance payment securing legal services.
121. Compensation Agreement – Defines partner earnings structure.
122. Corporate Governance – Framework governing business accountability.
123. Covenant Not to Compete – Restricts former partners’ competitive activities.
124. Debt Ratio – Indicates leverage by dividing liabilities by assets.
125. EBITDA – Earnings before interest, taxes, depreciation, amortization.
126. Equity Buy-In – Purchase of ownership stake in law firm.
127. Expense Ratio – Costs relative to income or assets under management.
128. Factoring – Selling accounts receivable for immediate cash.
129. Fair Market Value – Price agreed between informed, willing parties.
130. Firm Valuation – Process determining business market worth.
131. Float – Time between receiving funds and actual availability.
132. Key Person Insurance – Policy protecting business from loss of vital personnel.
133. Liability Exposure – Potential for legal or financial obligation.
134. Line of Credit – Flexible borrowing limit for short-term funding.
135. Profit Sharing – Distributing earnings to partners or employees.
136. Partnership Agreement – Legally binding terms among firm partners.
137. Profit Margin – Percentage of revenue retained as income.
138. S-Corporation – Pass-through entity taxed at shareholder level.
139. Scalability – Ability to grow revenue without proportional cost increases.
140. Silent Partner – Investor without operational involvement.
141. Succession Planning – Strategy transferring ownership and management.
142. Uniform Partnership Act – Statutory framework for partnerships.
143. Valuation Discount – Reduction applied to minority or illiquid interests.
144. Working Capital – Funds available for daily operations.

Legal, Insurance, and Risk Management

145. Errors & Omissions Insurance – Protects professionals from claims of negligence.
146. Fiduciary Liability Insurance – Covers mismanagement of employee benefit plans.
147. Malpractice Tail Coverage – Extends coverage after a policy ends.
148. Premium Financing – Borrowing funds to pay life insurance premiums.
149. Reinsurance – Insurance purchased by insurers to reduce risk exposure.
150. Umbrella Policy – Supplemental liability coverage above underlying policies.