A contingent trust is a trust that does not exist until a certain event occurs. Oftentimes, contingent trusts are part of your Last Will and Testament. In your Will, you should designate a trustee to serve as the fiduciary of the trust and specify the terms of administration. A trustee can be someone you know and trust or a corporation.
Parents of minor children will often create contingent trusts in the event something happens to them while their children are too young to manage their inheritance. The contingency is the age limit. If the children are under a certain age when their parents pass away, the inheritance will go into a trust and be managed by a trustee. Distributions from the trust can be made for specific purposes, such as health, education, maintenance, and support (or HEMS) until the child reaches a desired age. Ultimately, contingent trusts create an additional safety net for individuals in their overall estate plan, providing security for families in all scenarios.