Glossary: Family Finance Terms
This glossary defines 28 family finance terms with one-sentence definitions focused on practical family application. Updated quarterly as new concepts emerge.
Terms
Allowance System: Regular payments to children tied (or not tied) to chores, designed to teach budgeting, saving, and spending decisions before adulthood.
Blended Family Planning: Financial coordination strategies for families with stepparents, stepchildren, and multiple sets of biological children requiring distinct inheritance and support structures.
Buy-Sell Agreement: Legal contract specifying what happens to business ownership upon death, disability, retirement, or departure of an owner, preventing ownership from passing to unintended parties.
Caregiver Agreement: Written contract specifying compensation for family members providing care to aging relatives, establishing fair payment while preserving Medicaid eligibility.
Custodial Account: Investment account (UTMA/UGMA) held by an adult for a minor's benefit, with assets transferring to the child at age 18-21 depending on state law.
Elder Financial Abuse: Improper use of an older adult's finances by family members, caregivers, or strangers, affecting approximately 1 in 10 Americans over age 60 annually.
Equal vs. Equitable Distribution: Distinction between dividing assets equally (same dollar amounts) versus equitably (accounting for differing needs, contributions, or circumstances).
Estate Freeze: Tax planning technique that locks in current business value for estate purposes while transferring future appreciation to heirs tax-free.
Ethical Will: Non-legal document transmitting values, life lessons, and family history to heirs, complementing the legal will's distribution of assets.
Family Bank: Structured lending arrangement within families, typically charging below-market interest rates while maintaining formal documentation and repayment expectations.
Family Council: Formal meeting structure for multigenerational families to discuss financial decisions, typically established when significant wealth or business interests require coordination.
Family Governance: Structures and processes (meetings, bylaws, roles) that help families make collective financial decisions and manage shared assets across generations.
Family Limited Partnership (FLP): Legal structure allowing senior family members to transfer business or investment assets to heirs while retaining control and obtaining valuation discounts.
Family Mission Statement: Written declaration of shared values and financial priorities guiding family decision-making about spending, giving, and wealth transfer.
Financial Infidelity: Deception about money matters between partners, including hidden accounts, secret debts, or undisclosed spending, affecting approximately 30% of couples.
Financial Therapy: Specialized practice combining mental health counseling with financial planning to address the emotional and relational aspects of money decisions.
Generation-Skipping Transfer Tax (GSTT): Federal tax on transfers to grandchildren or more remote descendants, designed to prevent families from avoiding estate tax at each generation.
Grantor Retained Annuity Trust (GRAT): Irrevocable trust allowing business owners to transfer appreciation to heirs while receiving annuity payments during a set term.
Intentionally Defective Grantor Trust (IDGT): Trust structure enabling sales of assets to heirs without immediate capital gains recognition while removing appreciation from estate.
Intergenerational Wealth Transfer: Movement of financial assets from one generation to the next, totaling an estimated $84 trillion in the U.S. over the next 20 years.
Joint Account with Right of Survivorship: Bank or investment account owned by multiple parties where ownership transfers automatically to surviving owner(s) upon death.
Legacy Planning: Comprehensive approach to transferring not just assets but also values, stories, and family history across generations.
Money Genogram: Visual diagram mapping financial patterns, beliefs, and behaviors across multiple generations of a family, used in financial therapy.
Power of Attorney (Financial): Legal document authorizing a designated person to make financial decisions on behalf of another, typically used when the principal becomes incapacitated.
Prenuptial Agreement: Legal contract between future spouses specifying asset division and financial arrangements in the event of divorce, protecting pre-marital and family assets.
Sandwich Generation: Adults simultaneously caring for aging parents and dependent children, facing compressed financial resources and time constraints.
Sudden Wealth Syndrome: Psychological and behavioral challenges arising from rapid acquisition of significant assets through inheritance, business sale, or lottery, often leading to poor decisions.
Successor Trustee: Person designated to manage trust assets when the original trustee dies or becomes incapacitated, ensuring continuity of trust administration.
Cross-References
For detailed guidance on these concepts, see:
- Money Conversations with Partners
- Family Financial Meetings Agenda
- Therapist vs. Advisor Roles in Money Conflicts
- Digital Tools for Family Collaboration
- Documenting Family Legacy Stories
- Succession Planning for Family Businesses
Updates
This glossary is updated quarterly to incorporate emerging family finance concepts and refine definitions based on reader feedback. Subscribe for notifications when new terms are added.