Asset Protection Terms and Definitions

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Earnings on which taxes are not paid until a future date, usually when funds are withdrawn.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

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.

Revocable Trust
In a living, or revocable trust, you name yourself as the grantor, the trustee, and the current beneficiary. You then transfer some or all of your assets to the trust. The terms of the trust require that the trust is to be used for your benefit during your life. After your death, the living trust continues for the benefit of your intended beneficiaries.

Bearer Accounts
The bearer account requires a minimum of USD 7,000 as the initial deposit plus facilitator fees. Funds can only be deposited or withdrawn upon presentation of both a password and a bearer bank account book.

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.

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

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

Foreign Bank Accounts
There is a thriving industry of offshore practitioners advising U.S. citizens to set up offshore bank accounts.

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.