Antilapse; survivorship with respect to future interests under terms of inter vivos and testamentary trusts; substitute takers.

(1) As used in this section, the term:

(a) “Beneficiary” means the beneficiary of a future interest and includes a class member if the future interest is in the form of a class gift.

(b) “Distribution date,” with respect to a future interest, means the time when the future interest is to take effect. The distribution date need not occur at the beginning or end of a calendar day, but can occur at a time during the course of a day. The distribution date refers to the time that the right to possession or enjoyment arises and is not necessarily the time that any benefit of the right is realized.

(c) “Future interest” includes an alternative future interest and a future interest in the form of a class gift.

(d) “Future interest under the terms of a trust” means a future interest created by an inter vivos or testamentary transfer to an existing trust or creating a trust or by an exercise of a power of appointment to an existing trust directing the continuance of an existing trust, designating a beneficiary of an existing trust, or creating a trust.

(e) “Surviving beneficiary” or “surviving descendant” means a beneficiary or a descendant who did not predecease the distribution date or is not deemed to have predeceased the distribution date by operation of law.

(2) A future interest under the terms of a trust is contingent upon the beneficiary surviving the distribution date. Unless a contrary intent appears in the trust instrument, if a beneficiary of a future interest under the terms of a trust fails to survive the distribution date, and the deceased beneficiary leaves surviving descendants, a substitute gift is created in the beneficiary’s surviving descendants. They take per stirpes the property to which the beneficiary would have been entitled if the beneficiary had survived the distribution date.

(3) In the application of this section:

(a) Words of survivorship attached to a future interest are a sufficient indication of an intent contrary to the application of this section.

(b) A residuary clause in a will is not a sufficient indication of an intent contrary to the application of this section, whether or not the will specifically provides that lapsed or failed devises are to pass under the residuary clause.

(4) If, after the application of subsections (2) and (3), there is no surviving taker, the property passes in the following order:

(a) If the future interest was created by the exercise of a power of appointment, the property passes under the donor’s gift-in-default clause, if any, which clause is treated as creating a future interest under the terms of a trust.

(b) If no taker is produced by the application of paragraph (a) and the trust was created in a nonresiduary devise or appointment in the transferor’s will, the property passes under the residuary clause in the transferor’s will. For purposes of this section, the residuary clause is treated as creating a future interest under the terms of a trust.