A contingent trust is a type of express trust that becomes effective only when a specific future event occurs. Although the trust agreement is prepared in advance, the trust itself does not take effect until that event happens. In other words, the trust comes into existence and begins to operate only upon the occurrence of the specified condition. Contingent trusts are also referred to as standby trusts.
Contingent trusts are commonly used in estate planning and family law. They allow individuals to set aside assets for beneficiaries that will only be accessible under certain conditions, such as reaching a certain age or achieving specific milestones. These trusts can be beneficial for managing inheritance and ensuring that assets are distributed according to the grantor's wishes. Users can often create these trusts using legal templates provided by services like US Legal Forms, which offer forms drafted by qualified attorneys.
Here are a couple of examples of abatement:
Example 1: A parent sets up a contingent trust for their child that will only distribute funds when the child turns 25 years old. Until that time, the assets remain in the trust and are managed by a trustee.
Example 2: An individual establishes a contingent trust that becomes effective only if they become incapacitated, ensuring that their assets are managed according to their wishes during that time. (hypothetical example)
Examples of state differences (not exhaustive):
| State | Key Differences |
|---|---|
| California | Allows for more flexible terms in contingent trusts compared to some other states. |
| New York | Requires specific language in the trust document to clearly define triggering events. |
| Texas | Has unique rules regarding the management and distribution of assets in trusts. |
This is not a complete list. State laws vary and users should consult local rules for specific guidance.
| Term | Definition | Key Differences |
|---|---|---|
| Revocable Trust | A trust that can be altered or terminated by the grantor at any time. | Unlike contingent trusts, revocable trusts do not depend on future events. |
| Irrevocable Trust | A trust that cannot be changed or revoked once established. | Contingent trusts may be revocable or irrevocable depending on the terms set by the grantor. |
If you believe a contingent trust may apply to your situation, consider the following steps:
Browse our library of 85,000+ state-specific legal templates.
| Attribute | Details |
|---|---|
| Purpose | To manage and distribute assets based on future events. |
| Common Uses | Estate planning, conditional gifts, and asset protection. |
| Legal Requirements | Must specify conditions that trigger the trust's activation. |
A contingent trust is a trust that becomes effective only when a specific future event occurs.