Wealth has a vocabulary, and most of it is designed to be opaque. Some of the opacity is deliberate. Most of it is just the residue of tax law, partnership agreements, and regulation written by specialists for other specialists, then absorbed into ordinary conversation without ever being explained.
This glossary is the reference layer for the rest of the site. Each entry does the same five things a full post does, compressed: says what the term means in one sentence, explains the mechanics, gives the actual numbers with the year attached, corrects the most common misconception, and points to the longer piece.
The same rules apply here as everywhere else on this site. Numbers are sourced and dated. Jurisdiction is stated — most of these terms are specific to the United States, and where that matters it is said out loud. Nothing here is advice; every entry explains how a mechanism works, not what anyone should do about it.
New entries are added in batches. The list below is what exists so far.
Money & Structures
Carried interest — A fund manager’s share of a fund’s investment profits, conventionally 20%, taxed as long-term capital gain rather than as ordinary income.
QSBS (Qualified Small Business Stock) — A US tax provision that lets founders and early employees exclude up to $15 million of gain per company from federal tax.
SBLOC (securities-based line of credit) — A revolving line of credit secured by a pledged portfolio, which allows borrowing against investments without selling them.
Buy, borrow, die — The strategy of never selling an appreciated asset: hold it, borrow against it, and pass it at death, where the gain is erased.
83(b) election — A filing that taxes restricted stock at its value on the grant date rather than at vesting, converting later appreciation into capital gain.
Single-family office — A private company that manages one family’s money and administrative life, excluded from SEC registration under the family office rule.
Multi-family office — A firm delivering family-office services to multiple unrelated families, which unlike a single-family office must register as an investment adviser.
RSU (restricted stock unit) — A promise to deliver company shares on a future date, taxed as ordinary compensation income at the moment the shares are actually delivered.
ISO vs NSO — The two forms of employee stock option: one can produce entirely capital-gain treatment but triggers alternative minimum tax, the other is taxed as wages at exercise.
Liquidity event — A transaction that converts an illiquid stake in a company into cash or into securities that can be freely sold.
Net investment income tax (NIIT) — A 3.8% federal surtax on investment income above $200,000 of income ($250,000 joint) — the reason the top capital gains rate is really 23.8%.
Direct indexing — A separately managed account that replicates a benchmark index by holding most of its individual constituent stocks directly, rather than through a fund or ETF, so losses can be harvested stock by stock.
Tax-loss harvesting — Selling a losing investment to realize a deductible capital loss, then reinvesting the proceeds in a similar but not identical holding to keep market exposure intact.
10b5-1 plan — A pre-set trading schedule adopted by a corporate insider while free of material nonpublic information, giving an affirmative defense against insider-trading liability for the trades it later executes.
Trusts & Estates
Step-up in basis — The rule that resets an inherited asset’s cost basis to market value at death, erasing a lifetime of capital gain.
GRAT (Grantor Retained Annuity Trust) — A trust that passes investment growth above an IRS-assumed rate to heirs without using estate tax exemption.
Dynasty trust — An irrevocable trust built to hold wealth across successive generations without a transfer tax at each death, in states that permit very long or perpetual trusts.
Estate tax exemption — The amount a person can transfer free of federal estate and gift tax over a lifetime and at death: $15 million per person in 2026, with 40% tax above it.
Irrevocable trust — A trust the person who created it cannot amend or revoke, which is what moves the assets out of that person’s taxable estate and beyond most future creditors.
Grantor trust — A trust whose income is taxed to the person who funded it rather than to the trust or its beneficiaries, because that person retained one of the powers listed in the tax code.
IDGT (Intentionally Defective Grantor Trust) — An irrevocable trust deliberately drafted so its assets sit outside the estate while its income is still taxed to the grantor personally.
ILIT (Irrevocable Life Insurance Trust) — An irrevocable trust created to own a life insurance policy on the person who funded it, so the death benefit is paid outside that person’s taxable estate.
Generation-skipping transfer tax (GST) — A flat 40% federal tax on transfers that skip a generation, charged on top of gift or estate tax, with a $15 million exemption per person in 2026.
Annual gift tax exclusion — The amount one person can give another each year without filing a return or using lifetime exemption: $19,000 per recipient in 2026.
Family limited partnership (FLP) — A partnership holding family assets, where the senior generation keeps control and gives away non-controlling interests valued below their share of what it owns.
Valuation discount — A reduction in the appraised value of a private business interest for lack of control and lack of marketability, which lowers the gift and estate tax bill.
Charitable remainder trust (CRT) — An irrevocable trust that pays the donor an income stream for a term or for life and leaves whatever remains to charity, in exchange for an immediate deduction.
Spendthrift clause — A trust provision that stops a beneficiary from pledging away a future interest and stops creditors from reaching it, until the trustee actually pays out.
Trust protector — A person other than the trustee who holds defined powers over a trust — removing the trustee, moving it to another state, amending its administrative terms.
Probate — The court-supervised process that validates a will, pays an estate’s debts, and transfers what remains to its heirs, required whenever assets are titled in a person’s own name.
DAPT (Domestic Asset Protection Trust) — A self-settled irrevocable trust legal in about 20 US states, letting the person who funded it stay a discretionary beneficiary while shielding the trust’s assets from most future creditors.
Offshore trust — An irrevocable trust formed under foreign law, most often the Cook Islands or Nevis, that places assets under a legal system a US court cannot directly compel.
Funds & Investing
Accredited investor — The SEC threshold that permits a person to buy unregistered securities: $200,000 of income, or $1 million of net worth excluding a primary residence.
Tender offer (secondary) — A public offer to buy shares at a fixed price within a fixed window, used by private companies to let employees sell stock before an IPO.
LP and GP (Limited Partner / General Partner) — The two roles in a private fund limited partnership: the general partner runs the fund with unlimited liability, limited partners supply most of the capital with liability capped at what they invested.
Two and twenty — The standard hedge fund and private equity fee structure: a 2% annual management fee on assets plus 20% of profits as carried interest.
Hurdle rate — The minimum annual return, commonly 8%, a private fund must deliver to limited partners before the general partner can collect carried interest.
Distribution waterfall — The tiered order — capital back, preferred return, GP catch-up, carried interest — in which a private fund’s cash is paid out to investors and the manager.
Clawback — A partnership agreement provision forcing a fund’s manager to return carried interest already paid out if its cumulative take exceeds its contracted share of whole-fund profits.
Capital call — A formal notice from a private fund’s general partner requiring limited partners to wire a specified portion of their committed capital, typically within 10 to 20 business days.
Dry powder — Committed capital that a private fund has raised from investors but has not yet called and deployed into a specific investment.
Vintage year — The year used to classify a private fund for performance benchmarking, most commonly defined as the year of its first capital call rather than its legal formation date.
J-curve — The pattern in which a private fund’s reported returns fall in its early years, driven by fees and conservative valuations, before rising as investments mature and are sold.
DPI, TVPI, and IRR — The three standard metrics used to report a private fund’s performance: DPI measures cash actually distributed, TVPI measures total value including unsold holdings, and IRR annualizes the return to account for when cash moved.
Secondaries — The market in which investors buy and sell existing stakes in private funds before those funds have finished returning capital, rather than waiting for the fund to sell its holdings.
Continuation fund — A new private fund created by a general partner to acquire assets out of an older fund it manages, letting the GP keep holding a prized company past the original fund’s life.
Private credit — Lending to companies by non-bank investment funds rather than banks, typically structured as privately negotiated loans held to maturity instead of traded.
Qualified purchaser — A wealth threshold under the Investment Company Act of 1940 — $5 million in investments for an individual or family company, $25 million for certain institutional accounts — that lets a private fund accept unlimited such investors without registering with the SEC.
Endowment model — An investment approach, pioneered at university endowments such as Yale’s, that commits a large share of a perpetual portfolio to illiquid alternative assets funded by a time horizon few other investors can match.
Exchange fund — A private pooled vehicle that lets an investor swap a single appreciated stock for a diversified slice of a pooled basket without a taxable sale, in exchange for a lockup of roughly seven years.
Concentrated position — A single holding, usually one company’s stock, large enough that its price movement — not the broader market — drives most of a portfolio’s risk and return.
Tax & Jurisdiction
1031 exchange — A U.S. tax-code provision that lets an investor defer capital gains tax on investment real estate by reinvesting the proceeds into another like-kind property within a 45-day identification window and a 180-day closing deadline.
Cost segregation — An engineering-based study that reclassifies parts of a building into 5-, 7-, or 15-year depreciation categories, making them eligible for bonus depreciation years before the building shell itself would be.
Real estate professional status — A tax classification that exempts rental losses from the passive activity rules so they can offset wages and other active income, for anyone who clears a 750-hour, more-than-half-of-work-time test.
Opportunity zone — A designated low-income census tract where capital gains invested through a Qualified Opportunity Fund earn deferral and, if held long enough, exclusion from federal tax.
Depreciation recapture — The rule that taxes the portion of a property sale’s gain attributable to depreciation already deducted, under a different and often harsher rate than the rest of the gain.
Domicile vs. residency — Residency measures physical presence, usually counted in days, while domicile identifies a person’s one permanent, intended-forever home — a status that can outlast an actual move for years.
Non-dom — Someone tax-resident in one country while legally domiciled in another, a status that in a handful of jurisdictions taxes local income in full but shelters foreign income and gains unless remitted.
Expatriation / exit tax — A one-time US federal tax that treats a high-net-worth American who renounces citizenship or long-term residency as if they had sold their entire worldwide portfolio the day before leaving.
Golden visa — A country’s grant of renewable residency rights to a foreign national in exchange for a qualifying investment, rather than a job offer or a family tie.
Access & Status
Donor-advised fund — A charitable account that produces an immediate tax deduction while leaving the timing and recipient of the actual grants open indefinitely.
Private foundation — A tax-exempt charity funded and controlled by one family or company, required to pay out about 5% of its assets a year and taxed 1.39% on investment income.
Measurement & Psychology
HNWI / UHNWI — The wealth-management industry’s client tiers: $1 million in investable assets makes a high-net-worth individual, $30 million an ultra-high-net-worth one.
Liquid net worth — The share of net worth held in cash and marketable securities that could become spendable money within days, excluding homes and private business stakes.
Corrections and suggested terms are welcome. The glossary is maintained alongside the main canon, and entries carrying a legislated or indexed figure are reviewed annually.