S Corporation: A corporation whose income is generally taxed to its shareholders, thus avoiding a corporate level tax. An election available to a corporation to be treated as a partnership for income tax purposes. To be eligible to make the election, a corporation must meet certain requirements as to kind and number of shareholders, classes of stock, and sources of income.

Section 2503(c) Trust for Minors: A trust designed to comply with Section 2503(c) of the Internal Revenue Code so that a gift placed in such a trust for the benefit of a minor will qualify for the gift tax annual exclusion although they are not gifts of a present interest.

Section 303 Stock Redemption: When certain requirements are met, this section of the Internal Revenue Code allows a shareholder's estate or heirs to sell to the deceased's closely held corporation enough stock to pay federal and state death taxes, costs of estate administration, and funeral expenses without the corporation's distribution being treated as a dividend for income tax purposes

Section 401(k) Plan: A qualified profit sharing or thrift plan that allows participants the option of putting money into the plan or receiving funds as cash. The employee can voluntarily elect to have his or her salary reduced up to some maximum limit, which is then invested in the employer's Section 401(k) plan.

Section 457 Plan: A plan which provides an exclusion from gross income for a certain portion of salary deferred by a participant under the plan of a state or local government, a tax-exempt organization (excluding churches), or of an independent contractor of such government or organization (e.g., a physician providing independent services to a hospital).

Section 6166: A section of the Internal Revenue Code that allows for a 14-year spreadout of the estate tax for estates that qualify (generally estates that include closely held businesses or farms).

Secular Trust: An irrevocable trust which is a separate tax-paying entity from the company. Assets contributed to a secular trust are currently taxable to the trust beneficiary. In contrast to a rabbi trust, a secular trust is beyond reach of corporate creditors in the event of bankruptcy.

Settlement Option: Ways in which life insurance policy proceeds can be paid other than in a lump sum, including interest, fixed period, fixed amount, and life income options.

Simplified Employee Pension (SEP) IRA: A retirement program for self-employed people or owners of small companies allowing them to defer taxes on investments intended for retirement

Sinking Fund Approach: A benefit funding technique wherein assets are set aside in order to accumulate the necessary funds to pay future benefit expenses.

Sound Mind: The testator possesses sound mind for the purposes of making a will if he or she: (1) understands the nature of the act of making a will or codicil thereto, (2) knows the extent and character of the property subject to the will, (3) knows and understands the proposed disposition of that property, and (4) knows the natural objects of his or her bounty (i.e. his or her heirs). Whether the testator was of sound mind is tested (determined) by the state of the testator's mind at the time the will or codicil is executed (written and signed) and varies by state.

Split Dollar Plans: A method of purchasing life insurance in which the premium payments and policy benefits are divided, usually between an employer and employee. Many types of split dollar designs are possible. It can be a valuable executive benefit that provides life insurance protection for an executive's survivors at a minimal cost (the economic benefit cost) to the employee.

State Death or Inheritance Taxes: The tax imposed by the state in which you live and/or where your property is located, if different, on the transfer of that property to another at your death.

Statute of Limitations: A statute, which bars lawsuits upon valid claims after the expiration of a specified period of time. The period varies by state law and for different kinds of claims.

Step Up In Basis: A decedent's capital gains property that passes to others escaping capital gains tax when sold by the person who inherits the property. Persons inheriting capital gains property receive the property at date-of-death fair market value. In effect, the basis in this property is deemed to be "stepped up" and does not reflect the decedent's original cost basis for determining applicable capital gains tax on the sale of the property.

Stock Appreciation Rights Plan (SAR): A right granted to an employee to receive cash and/or stock equal to the increase in value of the company's stock after the date the stock appreciation right (SAR) is granted. Generally no tax consequences to the employer or employee upon the grant of the right. It is treated as an unfunded, unsecured promise to pay money in the future. The employee is ordinarily given the right to decide when the SAR will be exercised and will recognize ordinary income upon exercise in an amount equal to the cash and/or fair market value of the other assets received.

Stock Bonus Plan: A method of compensating selected executives by issuing company stock in lieu of or in addition to cash bonus compensation. The executive is taxed on the value of the stock as ordinary income and any increase in value of the stock is owned by the executive. The bonus is deductible by the employer if it is reasonable compensation for services rendered.

Stock Company: Company owned by stockholders who share in the profits of the company.

Stock Redemption Plan: In a stock redemption or entity purchase plan, the business agrees to purchase a deceased or departing owner's interest. The purchase is made for an agreed-on price or according to an agreed-on formula.

Succession: A term used to describe transfers of asset ownership through inheritance, gifting, preferential sale, or other means that fulfill the wishes of the person(s) with present ownership of the assets.

Suicide Clause: Contractual provision in a life insurance policy stating that if the insured commits suicide within two years after the policy is issued, the face amount of insurance will not be paid; only premiums paid will be refunded.

Supplemental Executive Retirement Plan: A type of non-qualified deferred compensation plan often used to attract and retain executives. Generally, the promised benefits are paid from the employer's general assets, and no amounts are specifically earmarked for future benefit payments. Usually the employee has no option to receive the funds as current compensation.

Surrender Charge: The fee charged to a policy owner when a life insurance policy or annuity is surrendered for its cash value.

Aliases (separate with |): S