Tuesday, January 06, 2009
A contingent trust is a written agreement directing how a person's estate should be managed and distributed in the event of a certain occurrence. In most cases, a contingent trust is used to address the possibility that your spouse does not survive you and you have young children. You may shudder to think how your young children might use their inheritance. There are plenty of examples of a child inheriting property and quickly expending it on fast cars and a fast lifestyle. Also, if your child is a minor, it is likely that his inheritance would require a guardianship. This means that the Court would decide who to appoint as guardian and the whole matter would be public record. The guardianship would terminate at the age of majority (18 years) and the money released to the child. The contingent trust is used to not only select a trustee of your choosing, but to instruct when your children should receive their inheritance. Frequently, the trust provides for distributions at different ages. For example, you may decide to distribute 25% of the trust at age 30, 25% at age 35, and the remainder at age 40. The trustee would have discretion to distribute or expend money on your child's behalf.