Asset Protection Terms and Definitions

Portfolio
A collection of securities assembled for an investment goal.

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.

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.

Living trust
A trust that is established while the grantor is still alive. Compare to testamentary trust.

Asset Allocation
When you divide your money among various types of investments, such as stocks, bonds, and short-term investments (also known as "instruments"), you are allocating your assets. The way in which your money is divided is called your asset allocation.

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.

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.

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.

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.

Diversification
Holding several investments that have different risks. The concept of "Don't put all your eggs in one basket." The chance that a single stock or other investment will lose money is offset by the chances of your other stocks and investments making money.