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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.
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.
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Earnings on which taxes are not paid until a future date, usually when funds are withdrawn.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.
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.
Testamentary trust
A trust that is established by will. Compare to living trust.
Spendthrift Trusts
A spendthrift trust is created specifically to provide asset protection for the beneficiary. These trusts are written so that the beneficiary can receive the benefit of the trust, but have no right to demand benefits from the trust.
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.
Bonds
Essentially loans or debt. When someone lends you money, he or she gets an IOU that promises the loan will be repaid with interest. When you buy a bond, you're basically buying that IOU. A bond certificate is like an IOU: it shows the amount loaned (principal), the rate of interest to be paid on the loan and the date that the principal will be paid back (maturity date). Bonds can be issued by government agencies, such as the U.S. Treasury and by corporations to raise money.
Durable power of attorney
A power of attorney that remains valid when the principal becomes incapacitated.
Tax exempt entity
To hold the protected assets. The stock in this tax exempt entity can be held by an asset protection trust. As a result, the stock does not show up on the balance sheet of the taxpayer and the income from the assets is likewise off the tax return of the protected client.
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