Legal Definitions - contingent trust

A contingent trust is a specialized type of trust that is not immediately established upon a person's death. Instead, it is designed to come into existence only if certain specific conditions, which are clearly outlined in that person's will, are met. If these conditions are not fulfilled, the trust is never formed, and the assets intended for it would typically be distributed differently, often directly to other beneficiaries or according to other provisions in the will.

This legal tool allows a person to plan for future uncertainties, ensuring their assets are managed and distributed precisely as they wish, but only when a particular situation arises. It provides a flexible way to protect assets for specific purposes or beneficiaries, especially when the future circumstances of those beneficiaries are uncertain.

• Example 1: Funding a Grandchild's Higher Education

  Imagine a grandparent who wants to ensure funds are available for their grandchild's higher education, but only if the grandchild chooses to pursue it. In their will, the grandparent could specify that a contingent trust should be created only if their grandchild is accepted into an accredited university or college before reaching the age of 25. The trust would then hold funds specifically for tuition, books, and living expenses.

  How it illustrates the term: If the grandchild meets this condition by being accepted into a qualifying institution within the specified timeframe, the contingent trust is formed, and a trustee manages the funds for their education. However, if the grandchild decides not to attend university, or doesn't meet the age requirement, the condition for the trust's creation is not met. In this scenario, the trust never comes into existence, and the funds might then go to another family member or a charity as specified elsewhere in the will. The trust's very existence is dependent on a future, uncertain event.

• Example 2: Providing for a Beloved Pet

  Consider an individual who wants to ensure their beloved pet receives excellent care after their passing, but only if the pet outlives them. Their will could specify that a contingent trust should be established only if their dog, "Max," is still alive at the time of their death. This trust would hold funds dedicated to Max's food, veterinary care, and comfort, with a designated caregiver as the beneficiary of the trust's distributions.

  How it illustrates the term: If Max is still alive when the individual passes away, the condition for the trust's creation is met, and the contingent trust is formed. The funds are then used by the trustee to ensure Max's well-being. However, if Max passes away before the individual, the condition for the trust's creation is not met, and the trust never forms. The assets originally designated for Max's care would then be distributed according to other instructions in the will, perhaps to a different beneficiary or a pet-related charity. This clearly shows how the trust's existence is entirely conditional on a specific circumstance being present at the time of death.