Tax Matters

Tax Matters

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A Mini-Glossary of Financial Terms

Enrolled Agent (EA).  This designation is used by those persons who either have passed a 2-day written exam on taxes administered by the IRS or worked for five years or more for the IRS in various positions.  An EA is able to represent taxpayers before all administrative levels of the IRS for audits, collections, and appeals.


Accredited Estate Planner (AEP).  The National Association of Estate Planners & Councils awards this designation to those individuals who complete two graduate-level courses administered by The American College, meet specific professional requirements, and practice as an attorney, CPA, trust officer, CLU, CFP, or ChFC.


Certified Employee Benefit Specialist (CEBS).  The International Foundation of Employee Benefit Plans and the Wharton School (University of Pennsylvania) co-sponsor this program for individuals who take a 10-course college-level curriculum in employee benefit concepts and principles.


Certified Financial Planner (CFP).  This term and the acronym for it are credentials awarded by the Certified Financial Planner Board of Standards, Inc.  These individuals have experience in a variety of subjects, including but not limited to:  insurance, tax planning, investments, estate planning, and retirement planning.


Certified Public Accountant (CPA).  Accountants who pass a uniform examination in accounting and auditing and satisfy work experience, statutory, and licensing requirements of the state(s)


Chartered Financial Analyst (CFA).  Financial analysts who pass three annual exams covering economics, financial accounting, portfolio management, securities analysis, and ethics and have approved work experience in the field are awarded this designation by the Association for Investment Management and Research.


Chartered Financial Consultant (ChFC).  This financial planning designation is awarded by the American College for the insurance industry.  ChFCs must meet experience requirements and pass exams covering finance and investing.


Chartered Life Underwriter (CLU).  The American College of Bryn Mawr awards this designation to insurance and financial services professionals who have three years’ business experience, have passed eight college-level education courses, and agreed to abide by the College’s code of ethics.


Financial Planner (FP).  A professional who counsels individuals on their financial needs is a financial planner.  These financial needs include insurance, tax planning, investments, estate planning, and retirement planning.  Some financial planners are able to sell insurance and securities (with the appropriate licenses).  Some planners only offer specific advice on taxes or estate planning.


In the course of doing financial or estate planning, you’ll encounter various terms that might be new to you.  Some of these terms are:


Attorney-in-Fact.  The individual who is designated in the Power-of-Attorney document to act on behalf of another.


Community Property.  A system by which the interests of a husband and wife in property acquired during marriage are shared equally.  Only nine states follow the community property rules:  Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin.


Durable Power of Attorney.  A written legal document that lets an individual designate another person to act on his behalf, even if he or she becomes incapacitated.


Durable Power of Attorney for Healthcare.  A written legal document that gives another person authority to act on one’s behalf with regard to healthcare decisions.


Guardian.  The person legally entrusted with the care of a minor child or incompetent.  Such care includes managing the financial matters of the minor child or incompetent.


Living Trust.  A revocable trust established by a grantor during his or her lifetime in which the grantor transfers some or all of his/her property into the trust.


Living Will.  A legal document directing whether or not life prolonging measures should be used in the event of a terminal illness or incapacitation.


Power of Appointment.  A right given to another person in a written document such as a will or trust that allows that person to decide how to distribute one’s property.  It may be general (no restrictions) or limited (with restrictions).


Unified Credit.  An estate tax credit of $345,800 that allows an exemption for Federal death taxes up to $1,000,000 of property value.  This amount will change in future years.

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