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Glossary B – C

Bank Quality
Investment grade.

Bear Market
When the stock market appears to be declining overall, it is said to be a bear market.

A person named in a life insurance policy, annuity, will, trust, or other agreement to receive a financial benefit upon the death of the owner. A beneficiary can be an individual, company, organization, and so on.

Blue Chip Stock
The common stock of a company with a long history of profitability and consistent dividend payments.

A bond is evidence of a debt in which the issuer promises to pay the bondholders a specified amount of interest and to repay the principal at maturity. Bonds are usually issued in multiples of $1,000.

Book Value
The net value of a company’s assets, less its liabilities and the liquidation price of its preferred issues. The net asset value divided by the number of shares of common stock outstanding equals the book value per share, which may be higher or lower than the stock’s market value.

Bull Market
When the stock market appears to be advancing overall, it is said to be a bull market.

Buy-Sell Agreement
A buy-sell agreement is an arrangement between two or more parties that obligates one party to buy the business and another party to sell the business upon the death, disability, or retirement of one of the owners.

Bypass Trust
Also known as a credit shelter is generally used as a technique to pass assets to a surviving spouse in the event of the death of one spouse.

Capital Gain or Loss
The difference between the sales price and the purchase price of a capital asset. When that difference is positive, the difference is referred to as a capital gain. When the difference is negative, it is a capital loss. Cash Equivalents Short-term investments, such as U.S. Treasury securities, certificates of deposit, and money market fund shares, that can be readily converted into cash.

Cash Surrender Value
The amount that an insurance policyholder is entitled to receive when he or she discontinues coverage. Policyholders are usually able to borrow against the surrender value of a policy from the insurance company. Loans that are not repaid will reduce the policy’s death benefit.

Certified Public Accountant (CPA)
A professional license granted by a state board of accountancy to an individual who has passed the Uniform CPA Examination (administered by the American Institute of Certified Public Accountants) and has fulfilled that state’s educational and professional experience requirements for certification.

Charitable Lead Trust
A trust established for the benefit of a charitable organization under which the charitable organization receives income from an asset for a set number of years or for
the trustor’s lifetime. Upon the termination of the trust, the asset reverts to the trustor or to his or her designated heirs. This type of trust can reduce estate taxes and allows the trustor’s heirs to retain control of the assets.

Charitable Remainder Trust

A trust established for the benefit of a charitable organization under which the trustor receives income from an asset for a set number of years or for the trustor’s lifetime.
Upon the termination of the trust, the asset reverts to the charitable organization. The trustor receives a charitable contribution deduction in the year in which the trust is established, and the assets placed in the trust are exempt from capital gains tax.

The Consolidated Omnibus Budget Reconciliation Act is a federal law requiring employers with more than 20 employees to offer terminated or retired employees the opportunity to continue their health insurance coverage for 18 months at the employee’s expense. Coverage may be extended to the employee’s dependents for 36 months in the case of divorce or death of the employee.

Coinsurance or Co-Payment
The amount an insured person must pay for a covered medical and/or dental expense if his or her insurance doesn’t provide 100 percent coverage.

Community Property
State laws vary, but generally all property acquired during a marriage – excluding property one spouse receives from a will, inheritance, or gift – is considered community property, and each partner is entitled to one half. This includes debt accumulated. There are currently nine community property states: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin.

Compound Interest
Interest that is computed on the principal and on the accrued interest. Compound interest may be computed continuously, daily, monthly, quarterly, semiannually, or annually.

Consumer Price Index
The U.S. Department of Labor’s main indicator of inflation. The Consumer Price Index is calculated each month from the cost of some 400 retail items in urban areas throughout the United States.

Coverdell Education Savings Account (Coverdell ESA)
A Coverdell ESA (formerly known as an Education IRA) is a simple way to finance a child’s education. Any single individual who makes less than $110,000 a year in adjusted gross income (AGI), or married couple that makes less than $220,000 a year AGI is eligible to open a Coverdell. Account holders can contribute a maximum of $2000 a year.


Glossary D – H

Glossary T – Z

Glossary N – S

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