Contingent trust is a trust that can only be created should certain conditions be met as stated in a person’s will. To set up a contingent trust, a person states in their will the specific conditions they wish to be met in order for the trust to be created, which assets should go into the trust, and who are the beneficiaries. By having the assets go through a contingent trust, the grantor can control how the assets will be distributed and avoid some of the costs of probate. The most common reason to create a contingent trust is for kids or an incapacitated beneficiary. Parents usually bequest their assets to each other if one dies, but they may decide to create a contingent trust in the case that both die at the same time. This would ensure that a trustee oversees how the beneficiaries use the assets according to their parents’ wishes instead of those set by a court appointed guardian.
[Last updated in February of 2022 by the Wex Definitions Team]