Annual gift exclusion
A yearly federal exclusion for qualifying gifts to each recipient. It is distinct from the lifetime estate and gift exclusion.
Primary source ↗A little less jargon
Understand the language.
Use these short definitions as a starting point. A term’s precise legal or tax meaning depends on the context.
Asset allocation
How a portfolio is divided among categories such as stocks, bonds and cash, considering goals, time horizon and tolerance for loss.
Primary source ↗Capital gain
The excess of sale proceeds over adjusted tax basis when a capital asset is sold. Not every component of a business sale receives capital-gain treatment.
Primary source ↗Cash balance plan
A defined benefit pension that expresses the promised benefit as a hypothetical account with pay and interest credits.
Primary source ↗Catch-up contribution
An additional retirement contribution available to eligible older participants. The allowance and tax treatment depend on the plan, age and applicable rules.
Primary source ↗Charitable remainder trust
An irrevocable trust that pays qualifying noncharitable beneficiaries for a permitted term, then transfers what remains to charity. Payments may be taxable.
Primary source ↗Defined benefit plan
A retirement plan promising a benefit calculated under its formula, often using compensation and years of service.
Primary source ↗Defined contribution plan
A retirement plan with individual accounts whose values reflect contributions, investment results and fees.
Primary source ↗Diversification
Spreading investments across different holdings or asset categories to reduce concentration risk. It does not guarantee a profit or eliminate losses.
Primary source ↗Donor-advised fund
A charitable account controlled by its sponsoring organization. The donor may recommend grants or investments but no longer owns the contributed assets.
Primary source ↗Elective deferral
Pay an employee chooses to contribute to a retirement plan. Tax treatment depends on whether the contribution is traditional or Roth.
Primary source ↗Employee stock ownership plan (ESOP)
A defined contribution retirement plan invested primarily in the employer's shares.
Primary source ↗ERISA
The Employee Retirement Income Security Act: federal standards protecting participants in many private employer benefit plans.
Primary source ↗Liquidity
How readily an asset can be bought or sold when cash is needed, considering transaction costs and potential difficulty finding a buyer.
Primary source ↗Plan fiduciary
Someone whose actual functions involve specified control over a plan or its assets, or certain paid investment advice.
Primary source ↗Portability
An estate-tax election that can make a deceased spouse's unused federal exclusion available to the surviving spouse. Filing and eligibility requirements apply.
Primary source ↗Profit-sharing plan
A defined contribution plan allocating employer contributions under a stated formula. Contributions need not come only from current profits.
Primary source ↗Safe harbor 401(k)
A 401(k) design that meets prescribed requirements, including employer contributions, to avoid certain annual nondiscrimination tests. Other plan obligations remain.
Primary source ↗Tax basis
The tax amount used to calculate gain, loss and certain deductions. It often begins with cost and changes for specified events.
Primary source ↗Vesting
The portion of a retirement benefit that belongs to the participant and cannot be forfeited when employment ends. Employer contribution schedules may differ.
Primary source ↗Content reviewed: October 20, 2026 · General education
Educational information only, not personal financial, tax, legal or insurance advice.