Asset Protection Terms and Definitions

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.

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.

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.

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.

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 Funds can only be deposited or withdrawn upon presentation of both a password and a bearer bank account book.

Asset allocation
Diversification of your investments, usually between U.S. and international equities, fixed income, real estate, and commodities.

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.

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