Abstract: Phylogenetic trees are a central tool for studying language evolution and have wide implications for understanding cultural evolution as a whole. For example, they have been the basis of studies on the evolution of musical instruments, religious beliefs and political complexity. Bayesian phylogenetic methods are transparent regarding the data and assumptions underlying the inference. One of these assumptions—that languages change independently—is incompatible with the reality of language evolution, particularly with language contact. When speakers interact, languages frequently borrow linguistic traits from each other. Phylogenetic methods ignore this issue, which can lead to errors in the reconstruction. More importantly, they neglect the rich history of language contact. A principled way of integrating language contact in phylogenetic methods is sorely missing. We present contacTrees, a Bayesian phylogenetic model with horizontal transfer for language evolution. The model efficiently infers the phylogenetic tree of a language family and contact events between its clades. The implementation is available as a package for the phylogenetics software BEAST 2. We apply contacTrees in a simulation study and a case study on a subset of well-documented Indo-European languages. The simulation study demonstrates that contacTrees correctly reconstructs the history of a simulated language family, including simulated contact events. Moreover, it shows that ignoring contact can lead to systematic errors in the estimated tree height, rate of change and tree topology, which can be avoided with contacTrees. The case study confirms that contacTrees reconstructs known contact events in the history of Indo-European and finds known loanwords, demonstrating its practical potential. The model has a higher statistical fit to the data than a conventional phylogenetic reconstruction, and the reconstructed tree height is significantly closer to well-attested estimates. Our method closes a long-standing gap between the theoretical and empirical models of cultural evolution. The implications are especially relevant for less documented language families, where our knowledge of past contacts and linguistic borrowings is limited. Since linguistic phylogenies have become the backbone of many studies of cultural evolution, the addition of this integral piece of the puzzle is crucial in the endeavour to understand the history of human culture.