Financial Planning and Wealth Management for Families
Expert-defined terms from the Professional Certificate in Family Office Management course at London School of Business and Administration. Free to read, free to share, paired with a professional course.
Absolute Return is a measurement of the return on investment that is not… #
This term is related to benchmark and investment portfolio. Absolute return strategies are often used in hedge funds and other alternative investment vehicles. For example, a fund that generates a 10% return in a given year has an absolute return of 10%, regardless of how other funds or benchmarks performed.
Accredited Investor is a term used to describe an individual or entity th… #
This term is related to net worth and income requirements. For instance, in the United States, an accredited investor must have a net worth of at least $1 million or an annual income of at least $200,000.
Actuarial Science is the study of statistics and probability</i… #
This term is related to demographics and mortality tables. Actuaries use mathematical models to assess and manage risk, and their work is critical in the development of insurance products and pension plans.
Adjustable Rate is a type of interest rate that can change … #
This term is related to floating rate and benchmark rates. Adjustable rate loans, such as adjustable rate mortgages, often offer lower initial interest rates than fixed rate loans, but the rate can increase over time if market conditions change.
Alternative Investment is a type of investment that does not fit into the… #
This term is related to hedge funds, private equity, and commodities. Alternative investments often offer the potential for higher returns than traditional investments, but they also typically come with higher risk and lower liquidity.
Annual Percentage Rate is the rate of interest charged on a loan o… #
This term is related to nominal interest rate and compounding frequency. The APR takes into account the effects of compounding and is typically higher than the nominal interest rate. For example, a credit card with a nominal interest rate of 12% and monthly compounding may have an APR of 12.68%.
Annuity is a type of insurance product that provides a guarante… #
This term is related to retirement planning and pension plans. Annuities can be funded with a lump sum payment or through a series of payments, and they offer a predictable income stream that can help individuals plan for retirement.
Asset Allocation is the process of dividing a portfolio among diff… #
This term is related to investment strategy and risk management. Asset allocation is a key component of investment planning, as it helps to balance risk and potential return. For example, a conservative investor may allocate 60% of their portfolio to bonds and 40% to stocks, while an aggressive investor may allocate 80% to stocks and 20% to bonds.
Asset Protection is the process of protecting one's assets … #
This term is related to trusts and estate planning. Asset protection is often used by high net worth individuals or those who are at risk of being sued. For example, a doctor may use asset protection to shield their personal assets from medical malpractice claims.
Audit is an examination of a company's or individual's f… #
This term is related to financial reporting and accounting standards. Audits can be performed by internal staff or external auditors, and they help to ensure the integrity of financial statements and detect any material weaknesses or errors.
Bankruptcy is a legal process that allows an individual or… #
This term is related to insolvency and creditor rights. Bankruptcy can provide a fresh start for individuals or businesses that are overwhelmed by debt, but it can also have serious long-term consequences, such as damage to credit scores.
Beneficiary is an individual or entity that is entitled to… #
This term is related to estate planning and inheritance laws. Beneficiaries can be named in a will or trust document, and they may receive assets or income from the estate or trust.
Bond is a type of investment that represents a loan from th… #
This term is related to fixed income and credit risk. Bonds offer a relatively low-risk investment option, as they provide a fixed income stream and return of principal at maturity. For example, a corporate bond may offer a 5% coupon rate and mature in 10 years.
Budget is a plan for managing income and expenses over a gi… #
This term is related to financial planning and cash flow management. Budgeting helps individuals and businesses to prioritize spending, save for the future, and achieve their financial goals. For example, a household budget may allocate 50% of income towards necessities like housing and food, 30% towards discretionary spending, and 20% towards saving and debt repayment.
Business Succession is the process of transferring ownership or <i… #
This term is related to estate planning and exit strategies. Business succession planning helps to ensure the continuity and stability of the business, and it can involve the use of trusts, partnerships, or other legal structures.
Buy #
Sell Agreement is a contract that governs the transfer of ownership interests in a business. This term is related to partnership agreements and shareholder agreements. Buy-sell agreements can help to prevent disputes and ensure a smooth transition of ownership, and they often include provisions for valuation, payment terms, and other key issues.
Capital Gain is a profit made from the sale of an asset , su… #
This term is related to taxation and investment returns. Capital gains are often subject to taxation, and the tax rate may depend on the length of time the asset was held and the type of asset sold. For example, a long-term capital gain may be taxed at a lower rate than a short-term capital gain.
Cash Flow is the inflow or outflow of cash and cash … #
This term is related to liquidity and financial management. Cash flow is a critical component of financial planning, as it helps to ensure that individuals and businesses have sufficient funds to meet their expenses and achieve their goals. For example, a business may use cash flow projections to determine whether it can afford to hire new staff or invest in new equipment.
Charitable Giving is the act of donating assets or incom… #
This term is related to philanthropy and tax benefits. Charitable giving can provide tax benefits, such as deductions or credits, and it can also help to support worthy causes and promote social welfare. For example, a donor may contribute to a charitable foundation or establish a donor-advised fund.
Charitable Remainder Trust is a type of trust that provides a s… #
This term is related to estate planning and tax benefits. Charitable remainder trusts can help to minimize taxes and provide a lasting legacy for charitable causes.
Charitable Trust is a type of trust that is established for cha… #
This term is related to philanthropy and non-profit organizations. Charitable trusts can provide a flexible and tax-efficient way to support charitable causes, and they can be used to create a lasting legacy for generations to come.
Codicil is a supplemental document that amends or modifies … #
This term is related to estate planning and probate law. Codicils can be used to update a will or make minor changes, and they must be executed with the same formalities as the original will.
Compound Interest is the process of earning interest on bot… #
This term is related to savings and investment returns. Compound interest can help to grow wealth over time, and it is often used in savings accounts, certificates of deposit, and other time deposits. For example, a savings account with a 5% annual interest rate may earn $50 in interest over the first year, and then $52.50 in interest over the second year, as the interest earned in the first year is added to the principal.
Conservatorship is a legal arrangement in which an individual</… #
This term is related to guardianship and incapacity planning. Conservatorships can provide a necessary level of protection and support for individuals who are vulnerable or incapacitated.
Credit Score is a numerical rating that evaluates an ind… #
This term is related to credit history and lending decisions. Credit scores can range from 300 to 850, and they are often used by lenders to determine the likelihood of repayment and the interest rate to be charged. For example, a credit score of 700 or higher may qualify an individual for a lower interest rate on a mortgage or car loan.
Debt is an obligation to repay a loan or other financial… #
This term is related to credit and interest payments. Debt can be used to finance large purchases or investments, but it can also lead to financial difficulties if not managed carefully. For example, a mortgage or car loan may be necessary to purchase a home or vehicle, but high-interest credit card debt can quickly become unmanageable.
Diversification is the process of spreading investments across dif… #
This term is related to portfolio management and investment strategy. Diversification can help to minimize losses during market downturns and maximize gains during upswings. For example, a diversified portfolio may include a mix of stocks, bonds, and real estate, as well as international and domestic investments.
Donor #
Advised Fund is a type of charitable fund that allows donors to make tax-deductible contributions and then recommend grants to charitable organizations over time. This term is related to philanthropy and tax benefits. Donor-advised funds can provide a flexible and tax-efficient way to support charitable causes, and they can be used to create a lasting legacy for generations to come.
Durable Power of Attorney is a legal document that grants an ag… #
This term is related to estate planning and incapacity planning. Durable powers of attorney can provide a necessary level of protection and support for individuals who are vulnerable or incapacitated.
Economic Indicator is a statistic or metric that is used to mea… #
This term is related to macroeconomics and financial analysis. Economic indicators can provide insight into the overall direction of the economy and help investors make informed decisions. For example, the unemployment rate or GDP growth rate may be used as economic indicators.
Elder Law is a field of law that focuses on the legal needs… #
This term is related to gerontology and social services. Elder law attorneys can help older adults navigate the complex legal landscape and ensure that their rights and interests are protected.
Endowment is a fund or foundation that is established to provide <… #
This term is related to philanthropy and non-profit management. Endowments can provide a stable source of funding for charitable organizations, and they can be used to create a lasting legacy for generations to come.
Estate is the collection of assets and liabilities that an… #
This term is related to estate planning and probate law. Estates can include a wide range of assets, such as real estate, investments, and personal property, and they must be managed and distributed according to the deceased individual's wishes or the laws of the jurisdiction.
Estate Planning is the process of planning for the management</… #
This term is related to wills, trusts, and probate law. Estate planning can help to ensure that an individual's wishes are carried out, and it can also help to minimize taxes and other expenses. For example, a will or trust can be used to distribute assets to beneficiaries, while a power of attorney can be used to manage the estate during the individual's lifetime.
Executor is an individual or entity that is appointed to ma… #
This term is related to estate planning and probate law. Executors can be named in a will or appointed by the court, and they have a fiduciary duty to act in the best interests of the estate and its beneficiaries.
Family Limited Partnership is a type of partnership that is used t… #
This term is related to estate planning and business succession planning. Family limited partnerships can be used to transfer ownership of a family business or other assets, and they can also provide a framework for family governance and decision-making.
Family Office is a private wealth management firm that provides <b… #
This term is related to wealth management and family governance. Family offices can provide a range of services, including investment management, tax planning, and estate planning, and they can help to ensure that a family's wealth is managed effectively and sustainably over time.
Financial Planning is the process of creating a comprehensive</… #
This term is related to wealth management and personal finance. Financial planning can help individuals and families to achieve their financial goals, and it can also help to ensure that they are prepared for unexpected events or expenses. For example, a financial plan may include strategies for saving for retirement, paying off debt, and building an emergency fund.
Fiduciary is an individual or entity that has a legal oblig… #
This term is related to trust law and estate planning. Fiduciaries have a duty to act with care, loyalty, and impartiality, and they must avoid conflicts of interest and self-dealing.
Gift Tax is a tax that is imposed on the transfer of assets … #
This term is related to estate planning and tax law. Gift taxes can be used to transfer wealth from one generation to the next, and they can also be used to minimize estate taxes. For example, an individual may make annual gifts to their children or grandchildren to reduce their taxable estate.
Grantor is an individual or entity that creates a trust<… #
This term is related to estate planning and trust law. Grantors have a range of options and considerations when creating an estate plan, and they must carefully consider their goals, assets, and beneficiaries.
Gross Estate is the total value of an individual's assets a… #
This term is related to estate planning and tax law. The gross estate is used to calculate estate taxes, and it can include a range of assets, such as cash, stocks, bonds, and real estate.
Guardianship is a legal arrangement in which an individual … #
This term is related to conservatorship and incapacity planning. Guardianships can provide a necessary level of protection and support for individuals who are vulnerable or incapacitated.
Health Care Proxy is a legal document that appoints an agent</i… #
This term is related to advance directives and incapacity planning. Health care proxies can provide a necessary level of protection and support for individuals who are vulnerable or incapacitated.
Incapacitation is a state of being unable to manage one's own f… #
This term is related to incapacity planning and estate planning. Incapacitation can be temporary or permanent, and it can have significant consequences for an individual's financial and personal well-being. For example, an individual who is incapacitated may need to rely on a power of attorney or guardianship to manage their affairs.
Inheritance Tax is a tax that is imposed on the transfer of ass… #
This term is related to estate planning and tax law. Inheritance taxes can be used to transfer wealth from one generation to the next, and they can also be used to minimize estate taxes. For example, an individual may make annual gifts to their children or grandchildren to reduce their taxable estate.
Insurance is a contract between an insurer and an insured t… #
This term is related to risk management and financial planning. Insurance can provide a range of benefits, including liability coverage, property damage, and income replacement. For example, a life insurance policy may provide a death benefit to the insured's beneficiaries, while a disability insurance policy may provide income replacement during a period of disability.
Intentionally Defective Grantor Trust is a type of trust that is u… #
This term is related to estate planning and trust law. Intentionally defective grantor trusts can be used to transfer ownership of a family business or other assets, and they can also provide a framework for family governance and decision-making.
Interest Rate is the rate at which interest is charged or <… #
This term is related to borrowing and lending decisions. Interest rates can have a significant impact on the cost of borrowing and the return on investment, and they are often influenced by market conditions and economic factors. For example, a high interest rate may make borrowing more expensive, while a low interest rate may make lending more attractive.
Investment Advisor is a professional who provides investment advic… #
This term is related to wealth management and financial planning. Investment advisors can help individuals and families to achieve their investment goals, and they can also provide a range of services, including portfolio management, retirement planning, and tax planning.
Investment Portfolio is a collection of investments that are ma… #
This term is related to investment management and financial planning. Investment portfolios can include a range of assets, such as stocks, bonds, and real estate, and they can be tailored to meet the individual needs and goals of the investor. For example, a conservative investor may have a portfolio that is heavily weighted towards bonds, while an aggressive investor may have a portfolio that is heavily weighted towards stocks.
Irrevocable Trust is a type of trust that cannot be modified</b… #
This term is related to estate planning and trust law. Irrevocable trusts can be used to transfer wealth from one generation to the next, and they can also provide a range of benefits, including tax benefits and liability protection. For example, an irrevocable trust may be used to transfer ownership of a family business or other assets, while also providing a framework for family governance and decision-making.
Joint Tenancy is a type of ownership that allows two or more pe… #
This term is related to estate planning and property law. Joint tenancy can provide a range of benefits, including the avoidance of probate and the transfer of ownership to the surviving joint tenant. For example, a husband and wife may own a home as joint tenants, with the right of survivorship passing to the surviving spouse upon the death of the first spouse.
Keystone Species is a species that has a disproportionate impact o… #
This term is related to ecology and conservation biology. Keystone species can play a crucial role in maintaining the balance of an ecosystem, and their loss can have significant consequences for the environment.
Limited Liability Company is a type of business entity that provid… #
This term is related to business law and entrepreneurship. Limited liability companies can provide a range of benefits, including liability protection, tax benefits, and flexibility in ownership and management. For example, a limited liability company may be used to start a new business, while also providing personal liability protection for the owners.
Living Trust is a type of trust that is created during an <… #
This term is related to estate planning and trust law. Living trusts can provide a range of benefits, including the avoidance of probate, tax benefits, and liability protection. For example, a living trust may be used to transfer ownership of a family business or other assets, while also providing a framework for family governance and decision-making.
Long #
Term Care is a type of care that is provided to individuals who require assistance with daily living activities, such as bathing, dressing, and eating. This term is related to health care and elder law. Long-term care can be provided in a range of settings, including nursing homes, assisted living facilities, and home care. For example, an individual may require long-term care due to a disability or illness, and may need to rely on a caregiver or long-term care facility for support.
Medicaid is a government program that provides health insur… #
This term is related to health care and social services. Medicaid can provide a range of benefits, including medical coverage, long-term care, and disability services. For example, an individual may be eligible for Medicaid due to a disability or low income, and may receive medical coverage and other benefits through the program.
Medicare is a government program that provides health insur… #
This term is related to health care and social services. Medicare can provide a range of benefits, including medical coverage, hospitalization, and prescription drug coverage. For example, an individual may be eligible for Medicare due to age or disability, and may receive medical coverage and other benefits through the program.
Minor is an individual who is under the age of majority , wh… #
This term is related to family law and juvenile justice. Minors are subject to the care and control of their parents or guardians, and they may not have the same rights and responsibilities as adults. For example, a minor may not be able to enter into a contract or marry without the consent of their parents or guardians.
Net Worth is the total value of an individual's or #
Net Worth is the total value of an individual's or