14-2707

14-2707. Future interests; trusts;
distribution date; passage of property; alternative future
interest; definitions

A. A future interest under the terms of a trust is contingent on the beneficiary
surviving the distribution date. If a beneficiary of a future interest under the terms
of a trust fails to survive the distribution date, the following apply:

1. Except as provided in subsection C of this section, if the future interest is
not in the form of a class gift and the deceased beneficiary leaves surviving
descendants, a substitute gift is created in the beneficiary's surviving
descendants. Surviving descendants take by representation the property to which the
beneficiary would have been entitled if the beneficiary had survived the distribution
date.

2. Except as provided in subsection C of this section, if the future interest is in
the form of a class gift, other than a future interest to issue, descendants, heirs of
the body, heirs, next of kin, relatives, or family or a class described by similar
language, a substitute gift is created in the surviving descendants of any deceased
beneficiary. The property to which the beneficiaries would have been entitled if all of
them had survived the distribution date passes to the surviving beneficiaries and the
surviving descendants of the deceased beneficiaries. Each surviving beneficiary takes
the share to which that person would have been entitled if the deceased beneficiaries had
survived the distribution date. Each deceased beneficiary's surviving descendants who
are substituted for the deceased beneficiary take by representation the share to which
the deceased beneficiary would have been entitled if the deceased beneficiary had
survived the distribution date.

B. Words of survivorship attached to a future interest are, in the absence of clear
and convincing evidence to the contrary, a sufficient indication of an intent contrary to
the application of this section. Words of survivorship include words of survivorship
that relate to the distribution date or to an earlier or an unspecified time, whether
those words of survivorship are expressed in condition-precedent, condition-subsequent or
any other form.

C. If a governing instrument creates an alternative future interest with respect to
a future interest for which a substitute gift is created by subsection A of this section,
the substitute gift is superseded by the alternative future interest, whether or not an
expressly designated beneficiary of the alternative future interest is entitled to take
in possession or enjoyment.

D. If after the application of this section there is no surviving taker, the
property passes in the following order:

1. If the trust was created in a nonresiduary devise in the transferor's will or in
a codicil to the transferor's will, the property passes under the residuary clause in the
transferor's will. For purposes of this paragraph, the residuary clause is treated as
creating a future interest under the terms of a trust.

2. If no taker is produced by the application of paragraph 1 of this subsection,
the property passes to the transferor's heirs under section 14-2711.

E. A residuary clause in a will does not create an alternative future interest with
respect to a future interest created in a nonresiduary devise in the will, whether or not
the will specifically provides that lapsed or failed devises are to pass under the
residuary clause.

F. For the purposes of this section:

1. "Alternative future interest" means an expressly created future interest that
can take effect in possession or enjoyment instead of another future interest on the
happening of one or more events, including survival of an event or failure to survive an
event, whether an event is expressed in condition-precedent, condition-subsequent or any
other form.

2. "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.

3. "Class member" includes a person who does not survive the distribution date but
who would have taken under a future interest in the form of a class gift if that person
had survived the distribution date.

4. "Deceased beneficiary" means a class member who failed to survive the
distribution date and left one or more surviving descendants.

5. "Distribution date", with respect to a future interest, means the time when the
future interest is to take effect in possession or enjoyment. Distribution date does not
mean a date that necessarily occurs at the beginning or end of a calendar day but that
may occur at a time during the course of a day.

6. "Future interest" includes an alternative future interest and a future interest
in the form of a class gift.

7. "Future interest under the terms of a trust" means a future interest that was
created by a transfer creating a trust or to an existing 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.

8. "Surviving beneficiary" or "surviving descendant" means a beneficiary or a
descendant who neither predeceased the distribution date nor is deemed to have
predeceased the distribution date under section 14-2702.