Definition
A contingent interest is a property interest that will only occur if a specific condition is met. The holder might never receive the property if the condition doesn't occur. Only one contingent interest vests.
Not sure where this fits?
Answer a few questions and we’ll open the path that fits, at the right step.
Find my pathAbout this term
Contingent interests are conditional—they're contingent on something happening. For example, 'my property goes to my son if he graduates from college, otherwise to my daughter.' The son's interest is contingent on graduating; the daughter's interest is contingent on him not graduating. Only one contingent interest will vest. Contingent interests are harder to value, mortgage, or sell because occurrence is uncertain. If someone dies before their contingent interest vests, it's lost (passes out of their estate). Contingent interests matter in wills and trusts—many documents create contingent gifts. Tax treatment of contingent interests is complex because the interest's value depends on the probability of the condition occurring. Courts enforce contingent interests, but they require clarity about the condition. Ambiguous conditions (like 'my son if he's a good person') are difficult to enforce. Contingent interests can become vested interests once conditions are satisfied or the time for satisfaction passes. Contingent remainders and contingent reversions are common examples.
Pro Tip
If you have a contingent interest, ensure you understand the condition and its timeline. Work with an attorney to clarify ambiguities.
Example
A father's will states: 'My house to my son if he becomes a doctor, otherwise to my daughter.' The son's interest is contingent on becoming a doctor. If he doesn't, the house goes to the daughter.