Glossary
Commonly used terms in the financial world.
1099-INT
Tax form that reports interest income for a given tax year.
1099-R
Tax form that reports distributions from pensions, annuities, retirement or profit-sharing plans, IRAs, insurance contracts, etc.
Form 5498
Tax form that reports IRA annual contributions and rollover contributions, as well as the Fair Market Value of every IRA as of December 31st each year.
Form 5500
Tax form that reports the annual return of employee benefit plans.
1099-INT
Tax form that reports interest income for a given tax year.
A
Amortization Schedule
A document that indicates when payments will be due and the amount of the payments. It will also break down any applicable principal and interest amounts per payment. Amortization schedules are typically provided to the Lendee so that they know when the payments are due on the loan.
B
Beneficiary
If an original owner of an account dies, the person or entity designated as the “beneficiary” is the entitled party to receive the assets within the deceased person’s account. There are two types of beneficiaries:
Primary Beneficiary: If the account owner passes away, the assets will be inherited by any living and willing primary beneficiaries
Contingent Beneficiary: If all primary beneficiaries predecease the account owner or are not willing to accept the assets, the next in line to receive the assets is the contingent beneficiary.
C
Catch-Up Contribution
An IRS-approved deposit of funds placed into a retirement plan for a given tax year, over the normal contribution limits. An individual, age 50 or older, is eligible to make this additional contribution.
Contribution Limit
The maximum amount eligible to deposit into an account for a given tax year. The IRS may or may not change the contribution limit in a given year, so it is best to always consult the IRS website for the current contribution year.
D
Decedent
A person who has passed away.
Distribution
A disbursement of qualified funds from a retirement account.
Domicile
The jurisdiction in which a person lives and in which he or she intends to remain.
E
Earned income
Income that is actively earned including wages, tips, salaries, commissions, and income from businesses in which there is material participation.
Executor
The person who executes the terms of a will and administers the estate.
Earned income
Income that is actively earned including wages, tips, salaries, commissions, and income from businesses in which there is material participation.
L
Liability
An asset in debt; an entity that has money owed. Typical examples of liabilities in qualified accounts include mortgages used to purchase a Real Estate property with a non-recourse loan.
Living Trust
An agreement where a trustee has the legal possession of an original trust owner’s assets. The creator of the original trust has the right to amend or revoke the living trust at any time during their lifetime. Living Trusts are also known as Inter-Vivos Trust, Revocable Living Trust, or Family Trust.
P
Power of Attorney - POA
A written authorization to represent or act on another’s behalf in private affairs, business, or another legal matter. The person authorizing the other to act is the principal, grantor, or donor (of the power). The POA documents typically contains restrictions regarding the circumstances in which the individual being authorized is allowed to act.
Q
Qualified Plans
The IRS defines accounts that satisfy the IRS’s Internal Revenue Code qualifications in both form and operation. Typically, qualified accounts include Traditional, Roth, SEP, and SIMPLE IRAs, 401(k)s [including Solo 401(k)s], and other retirement plans.
R
Required Minimum Distribution - RMD
This is an amount that is required to be taken from a Traditional IRA, SEP IRA, SIMPLE IRA, and other retirement plans, when the owner of the account turns 72. There is no required distribution from a Roth IRA until after the death of the Roth IRA owner. The required minimum distribution (RMD) is calculated based on the value of the account on December 31st of the year before the year in which an RMD is due divided by the applicable distribution period presented in the appropriate life expectancy table published by the IRS.
Revocable Trust
A trust in which the trustor reserves the power to alter or terminate the trust or assigns the right to do so to someone else.
Direct Rollover
A movement of funds or illiquid assets from one non-like account to another (i.e.: Traditional IRA to Solo 401(k)). Direct rollovers occur between two institutions. The funds or illiquid assets that are contained within the rollover are not in the account owner’s possession at any time throughout this exchange.
Indirect Rollover
A movement of funds or illiquid assets from one retirement account to another [i.e.: Traditional IRA to Solo 401(k) or Traditional IRA to Traditional IRA]. When an indirect rollover occurs, the account owner takes possession of the funds or illiquid assets for a limited amount of time before remitting them to the second retirement account. Unlike a direct rollover, the indirect rollover must be completed within 60 days or less; therefore, the account owner cannot possess the funds or assets for an indefinite amount of time.
Roth Conversion
An intentional, taxable movement of funds or illiquid assets from a pre-tax retirement account to a post-tax retirement account. The most common accounts involved with a Roth IRA conversion are when an account moves funds or illiquid assets from a Traditional IRA to a Roth IRA.
Roth IRA
A qualified account that contains after-tax dollars and earnings. The investments in this type of account grow tax-free.
S
SEP IRA
A type of employer-sponsored retirement savings plan. SEP stands for Simplified Employee Pension Plan. The SEP IRA is a great option for self-employed individuals or small business owners. This type of qualified plan allows the business owner to potentially take a tax-deduction equivalent to the contributions made into the plan while saving for retirement.
Simple IRA
A type of employer-sponsored retirement savings plan. SIMPLE IRA stands for Savings Incentive Match Plan for Employees of Small Employers. These plans are a great way to increase the amount you and your employees are saving for retirement. The SIMPLE IRA is an alternative option for self-employed individuals or small business owners (with 100 employees or less). SIMPLE IRA plans you to potentially take a tax-deduction equivalent to the contributions made into the SIMPLE IRAs each year (subject to government guidelines and income limitations).
Successor Trustee
The entity or person of which was appointed by the original Trustee as the next Trustee if they should become incapacitated or die.
T
Taxed-Deferred
A status which refers to investment earnings and their taxability. These earnings could include interest, dividends or capital gains and accumulate tax free over a period of time. Once the investor takes constructive receipt of the gains, they will be taxed at that time; therefore, delaying the taxes that must be paid until a later time.
Trustee
The person or entity who administers the trust
Trustor
The person that creates the trust. (Also known as Grantor or Settlor.)
W
W-9
A tax form that certifies the tax ID and classification for a person or entity.
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Downtown Summerlin
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1980 Festival Plaza Drive Suite 300
Las Vegas, NV 89135
E: info@healthinfinance.com
T: 774-271-7678
