Hi John: Contingent trust are created when certain condition exists at the person's time of death. This would include, for example, a trust for children to help manage the monies of a minor child, or for example to help oversee management of monies for a child if disabled at the time of death. Taxation of trusts can happen in various ways. For example, tax on income distributions depending on the type of assets in the trust, or possibly through capital gains. It is a good idea to look at the terms of the trust. Who is liable for taxes on income earned by a trust depends on who receives or retains benefits from the trust (i.e., the trust entity, the beneficiaries, the grantor, or the powerholder). Who is liable for taxes on income received by an estate depends on how the income is classified (i.e., income earned by the decedent, income earned by the estate, income in respect of the decedent, or income distributed to beneficiaries).
In general, trusts and estates are taxed like individuals. General tax principles that apply to individuals also apply to trusts and estates. A trust or estate may earn tax−exempt income and may deduct certain expenses. These issues are complicated as you know. If you need further clarification, please hit reply and let me know prior to providing a rating. Otherwise, please provide a positive rating so I receive credit for providing you my services.