Asset Protection Terms and Definitions

Beneficiary
The person who receives the benefits or gifts from an estate, insurance policy, IRA, pension plan, or trust.

Private mortgage insurance (PMI)
Protection for the lender against a loss if a borrower defaults on a loan. It is usually required for loans in which the down payment is less than 20 percent of the sales price or, in a refinancing, when the amount financed is greater than 80 percent of the appraised value.

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Earnings on which taxes are not paid until a future date, usually when funds are withdrawn.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.

Durable power of attorney
A power of attorney that remains valid when the principal becomes incapacitated.

Offshore Financial Centers OFC
A recent study found that by the end of 1997, the share of cross-border assets held in the offshore sector ($4.8 trillion) accounted for more than half of all cross-border assets held globally.

Portfolio
A collection of securities assembled for an investment goal.

Asset allocation
Diversification of your investments, usually between U.S. and international equities, fixed income, real estate, and commodities.

Testamentary trust
A trust that is established by will. Compare to living trust.

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.

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.