BUZZWORDS
A Glossary of Common Legal and Financial Terms
The Quitmeier Law Firm has provided this convenient glossary of common legal and financial terms so that you understand the terminology in your important documents.
Investments
IRA
* Pre-tax Individual Retirement Account. Only taxed on withdrawal, penalty to
withdraw before 59 1/2, must begin withdrawal at 70 1/2
* Roth IRA: After Tax Retirement Account. Funded with money already taxed
* 529 Plan: Missouri State Income Tax Exempt Education Fund($25-$8000 per year)
CAPITAL GAIN
* Gain (profit) from a sale of an asset
* Capital loss is loss from the sale of an asset
* Current rate for long term (held more than 1 year) capital gains is generally 15
* Short term (less than 1 year) capital gains rate is at ordinary income tax rate
DIVIDEND
* Annual payment on stock owned (some stocks have zero dividend)
ORDINARY INCOME
* Money earned on a job or for a service rendered
STOCKS
* Equities or amount of shares you own in a corporation (Value Line resource at
library)
* Total shares times price per share equals the value of the corporation
* Mutual funds
BONDS
* Municipal
– Interest not taxed
* Corporate
– Debt a corporation owes you
* If interest rates go up, value of bond goes down
– Can hold until maturity
* Bond funds
PRICE / EARNINGS RATIO (PE)
* Method of valuing relative price of a business (used mostly in stocks)
– Price of stock per share divided by earnings per share (profit per share)
EARNINGS PER SHARE
* Profit of company divided by the number of shares
GROSS INCOME
* Sales or Income of a business before expenses
NET INCOME
* Income of a business after expenses are deducted
Estate Planning
TOD (or POD)
* Non-Probate Transfer (Transfer on Death or Payable on Death): A transfer of
property taking effect upon the death of the owner, pursuant to a beneficiary
designation
* Beneficiary Deed: TOD for real estate
* Recipients of TOD inherit in equal shares
ESTATE TAX
* Rate history from $600,000 exempt in the 90’s to 5.25 million in 2013
* All assets including life insurance
* Property passes to surviving spouse without tax consequence
* Rate 40
MARITAL DEDUCTION TRUST (BY-PASS TRUST)
* Method of Maximizing Estate Tax Exemption (Not needed any more)
* Estate Tax Exemption 2013: 5,250,000 2014: 5,340,000 2019: 11.4 million
WILL
* Ticket to Probate Court
* Estate Plan should plan around will
TRUST
* Separate entity with trustees and beneficiaries
* Use Trust instead of TOD for multiple beneficiaries (may not get along)
* Necessary for minor or disabled children and if want to delay payout to adults
* Ways to keep social security from accessing or considering for disabled individuals
PROBATE
* Death and Guardianship
* To be avoided by TOD, trusts, DPA
GUARDIANSHIP
* Guardian controls the person (Ward)
* Probate court
CONSERVATORSHIP
* Guardian controls the person’s property
* Probate court
DURABLE POWER OF ATTORNEY
* Must say “Durable” in title and text to survive incompetency
* – For Medical Care
– For pulling the plug (Mobar.org)
– For Financial matters
LIFE INSURANCE
* Term
– Expires after a set certain number of years
– No guaranteed insurability after expiration
– No cash value
* Whole life (or permanent)
– Guaranteed insurability for life (premium may increase)
– Builds cash value that you can receive w /0 dying and adds to death benefit
Ownership of Property
TENANTS BY THE ENTIRETY
* Husband and wife only; on death of one, interest automatically passes to survivor
* Creditors of one cannot reach asset
* This is the default for spouses if do not specify ownership type
– Do not let banks or investment houses categorize you as joint tenants
JOINT TENANTS (with Right of Survivorship)
* Decedent’s interest passes automatically to survivor(s)
* Creditor can force sale and liquidation of property and pay non-debtor their share
TENANTS IN COMMON
* Interest passes to decedents of deceased
* Default if do not elect joint tenants
JOINT AND SEVERAL LIABILITY
* All parties individually liable for the entire debt (Creditor can go after just one)
Each part can seek contribution from other persons liable on the obligation
DEEDS
* Warranty
– Guarantees ownership
* Quitclaim
– Conveys whatever interest, if any (Brooklyn Bridge)
* Special warranty
– Quitclaim whatever interest, if any, but warranty that you have not deeded this interest, if any, to anyone else
Business Entities
CORPORATION
* Formed under state law through the Secretary of State
* Limits shareholder’s liability to the amount of the investment (to company assets)
* Has shareholders, board of directors, and officers
* Must report annually to the Secretary of State
* C-corps pay tax at corporate level and then if issue dividends the shareholder pays
again as dividend income
* S-corps pass profit and loss, and thus tax, to shareholders
LIMITED LIABILITY COMPANY
* Formed under state law through the secretary of state
* For smaller businesses
* Members (called this instead of shareholders) are owners
* May appoint managers
* No annual reporting
* Limits members’ liability to the amount of the investment (to company assets)
PARTNERSHIP
* Each party jointly and severally liable for all obligations of partnership even if the other partner committed the partnership to the obligation without other partners knowledge
* Taxes pass though like S-Corp
* Unwise
Court Structure in Missouri
CIRCUIT COURT
* All Counties in a Circuit (some transgress more than one county).
* Platte is the 6th Circuit, Clay the 7th Circuit and Jackson the 16th Circuit
PROBATE COURT
* A special court with dedicated judge for probate matters, but the judge might hear other matters too
SMALL CLAIMS COURT
* Do not need lawyers
* Disputes under $5,000 (in Missouri) and under, $4,000 (in Kansas) and under
NON-PARTISAN COURT PLAN
* Judges not elected, but appointed by Governor from a list of three attorneys narrowed by a five person local committee of two attorneys who reside in county elected by the local Bar Association and two citizens who reside in county appointed by governor and chief judge of the court of appeals in that district
– Only Platte, Clay, Jackson, Greene, St. Louis Counties and St. Louis City
– Other counties elect judges
– Query: will elected judge remain impartial or favor their supporters
TRAFFIC POINT SYSTEM
8 points in 18 months = 30 day suspension
12 points in 12 months = 1 year suspension
2 points for each moving violation for municipal and county tickets
3 points for each moving violation for Highway Patrol tickets
2 additional points for accidents
0 points for non-moving violations and speeding 5 mph and under
* SR-22 Insurance
– Required to receive your license returned after suspension
* DUI I DWI
– Ticket for city
– First offense; approx. $400 in fines, probation 2 years, alcohol school
– Administrative revocation
–
90 days for first time – 60 can be with hardship – Hardship license: to and from work and other essentials
Lawsuits
ALLEGE
* To claim that something is true
ANSWER
* The document filed with the court by the defendant responding to the plaintiff’s allegations and stating the defenses to the Petition, due in 30 days from service in Missouri and 20 days in Kansas.
DAMAGES
* The second element in every lawsuit (the first being liability). The loss, in money, that a plaintiff claims should be awarded.
DEFENDANT
* The person or company against whom a lawsuit is filed
DEPOSITION
* Sworn testimony given in the course of a lawsuit prior to the trial. A court reporter transcribes the testimony. Any plaintiff, defendant, or witness may be deposed. It allows one side to discover what the other side intends to say. Just like court testimony, except it is in an attorney’s office and no judge is present.
INTERROGATORIES
* Written questions submitted by one side to the other, sometimes filed with the court, which must be answered under oath. Interrogatories usually ask specific questions on the facts of the case
JUDGMENT
* The final decision of the court to end a lawsuit
LEGAL ASSISTANT/PARALEGAL
* A person on an attorney’s staff who assists the attorney under his or her supervision in document preparation and information-gathering. Like a nurse in medicine.
LIABILITY
* Legal responsibility, like negligence or breach of contract. The first element in every lawsuit that must be proved against a defendant before the plaintiff is entitled to a judgment.
MOTION
* A paper, filed with the court, which asks the court to make a ruling (Order) during a lawsuit. The motion may ask for final judgment or for intermediary rulings preliminary to trial.
ORDER
* A ruling by the judge on any issue brought up by the parties.
PETITION
* The document filed with the court stating the plaintiffs claim for liability and
damages
PLAINTIFF
* The person who asks the court to award him/her a remedy (e.g. money damages, an
injunction, a declaration of rights, or responsibilities)
PLEADINGS
* All the papers filed with the clerk of the court during the lawsuit, usually prepared
by attorneys.
STATUTE OF LIMITATIONS
* The law which puts an absolute time limit on filing a Complaint (Petition). There are different statutes of limitations for different areas of law. For example, in a case involving bodily injury from negligence occurring in Missouri, this date is 5 years after the date of your injury and 3 years in Kansas. There are some exceptions to this law which may allow the filing more than two years after the injury. Always consult an attorney immediately if you believe that you have a claim, and are uncertain as to the statute of limitations for your claim. Your claim is barred after the statute of limitations runs.
SUMMARY JUDGMENT
* Trials are for the judge or jury to unveil the facts. When the facts are not in dispute, but the law is, no trial is needed. The parties stipulate to the facts and then the judge applies the law and may grants a summary judgment without a trial.
This publication is for informational purposes only, nothing contained within should be construed as legal advice, nor do any of the foregoing explanations have any legal binding precedent This information is provided by the Quitmeier Law Firm in an effort to assist clients and potential clients in better understanding common legal and fmancial terms. The choice of a lawyer is an important decision and should not be based upon advertisements alone.
