Insurance Terms

Tax Basis

In finance, the original cost of and additions to an asset, less accumulated depreciation, that goes into the calculation of a gain or loss for tax purposes. For investments, the price at which an investment asset was purchased, plus any additions, reinvested dividends, and capital gains that have been realized.
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Tax Bracket

The category into which you fall for federal income tax purposes based on the tax rate that would apply to your next dollar of income. Under a progressive tax system, increases in taxable income generally put the taxpayer in a higher tax bracket with higher income tax rates. Under current federal tax law, there are five tax brackets for individuals: 15%, 28%, 31%, 36%, and 39.6%.
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Tax Credit

A dollar-for-dollar reduction in the amount of taxes owed. Under certain conditions tax credits are allowed for low-income people over 65, individuals with disabilities, income tax paid to a foreign country, child care expenses, adoption costs, rehabilitation of historic properties, research and development, building low income housing, and providing jobs for economically disadvantaged people.
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Taxable Estate

The value of the property in a decedent's estate after allowable exclusions, exemptions, and deductions.
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Taxable Gain

The positive difference between the amount realized on the disposition of an asset and the adjusted basis in the asset. The resulting figure is a gain, which depending on the taxpayer's circumstances, may be treated as ordinary income and/or capital gains.
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Taxable Gifts

Transfers of property made during the year which exceed the annual gift tax exclusion ($10,000 per recipient in 1999).
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Tax-Free Exchange

Section 1035 of the Internal Revenue Code provides that certain exchanges of life insurance contracts, annuity contracts, and modified endowment contracts will generally not trigger a taxable gain as long as the owner is the same person under both contracts. Section 1031 of the code provides for like-kind exchanges of business or investment property.
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Temporary Disability

A disability that is expected to last no more than one year.
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Tenants-in-Common

Ownership of property by two or more persons in which each owner has an undivided interest. At the death of an owner the interest becomes part of the estate and does not pass to co-owners.
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Term Insurance Rider

An endorsement or attachment to a life insurance policy that provides additional term coverage for only a specified, limited period. If the insured dies during this time, the designated beneficiary(ies) can receive death benefit proceeds.
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Term Life Insurance

A form of life insurance which provides coverage for a specified period of time and does not build cash value.
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Testamentary

The passing of property by will.
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Testate

A person who dies with a will is said to die testate, while a person who dies without a will is said to die intestate.
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Testator

One who makes or has made a will; one who dies leaving a will.
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Three-Year Rule

A rule that brings back into the estate certain gifts, for estate tax purposes, made in the three year period before death. Gifts brought back into the taxable estate are subject to estate taxes.
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Time Value of Money

A price placed on the time an investor has to wait until an investment matures, as determined by calculating the present value of the investment at maturity.
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Transfer for Value Rule

The transfer of some or all of the ownership rights in a life insurance policy to another party in exchange for cash or other forms of valuable consideration (as defined by the IRS). In general, if you effect a transfer for value with a life insurance policy, the death benefit proceeds payable under the policy may lose their income tax-exempt status.
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Transferability of Interests

This phrase refers to the ease with which ownership interests can be transferred from one owner to another, for example, as collateral.
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Transracial Adoption

Adoption in which the adoptive child is of one race, and the adoptive parents are of another.
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Trust

A legal entity in which a person, called a trustee, holds title to and manages property for the benefit of another person, called a beneficiary. A trust created during the trustor's lifetime is called a living or inter vivos trust, and a trust created by a will is called a testamentary trust.
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Trustee

The holder of legal title to property for the management, use, or benefit of another.
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Trustor

The person who executes a deed to convey title to property or who creates a trust. Also called a creator, settlor, donor, or grantor.
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