Section 2-707
(a)
If an instrument is silent on the requirement of survivorship, a future interest under the terms of a trust shall be contingent on the beneficiary surviving the distribution date. In that case, if a beneficiary of a future interest under the terms of a trust fails to survive the distribution date, the following shall apply:
- (1) If the future interest is not in the form of a class gift and the deceased beneficiary leaves surviving descendants, a substitute gift shall be created in the beneficiary’s surviving descendants. Such descendants shall take per capita at each generation the property to which the beneficiary would have been entitled had the beneficiary survived the distribution date.
- (2) 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 language of similar import, a substitute gift shall be created in the deceased beneficiary or beneficiaries’ surviving descendants. The property to which the beneficiaries would have been entitled had all of the beneficiaries survived the distribution date shall pass to the surviving beneficiaries and the surviving descendants of the deceased beneficiaries. Each surviving beneficiary shall take the share to which the surviving beneficiary would have been entitled had the deceased beneficiaries survived the distribution date. Each deceased beneficiary’s surviving descendants who are substituted for the deceased beneficiary take per capita at each generation the share to which the deceased beneficiary would have been entitled had the deceased beneficiary survived the distribution date. For the purposes of this paragraph, “deceased beneficiary” shall mean a class member who failed to survive the distribution date and left 1 or more surviving descendants.
(b)
If, after the application of subsection (a), there is no surviving taker, the property shall pass 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 shall pass under the residuary clause in the transferor’s will. For purposes of this section, a residuary clause shall be treated as creating a future interest under the terms of a trust;
- (2) if no taker is produced by the application of clause (1), the property shall pass to the transferor’s heirs under section 2-711.
Comment
Rationale of section
This section applies only to future interests under the terms of a trust. For shorthand purposes, references in this Comment to the term “future interest” refer to a future interest under the terms of a trust.
The objective of this section is to project the antilapse idea into the area of future interests. The structure of this section substantially parallels the structure of the regular antilapse statute, Section 2-603, see G.L. c. 191 § 22, and the antilapse-type statute relating to beneficiary designations, Section 2-706. The rationale for restricting this section to future interests under the terms of a trust is that legal life estates in land, followed by indefeasibly vested remainder interests, are still created in some localities, often with respect to farmland. In such cases, the legal life tenant and the person holding the remainder interest can, together, give good title in the sales of the land. If the antilapse idea were injected into this type of situation, the ability of the parties to sell the land would be impaired if not destroyed because the antilapse idea would, in effect, create a contingent substitute remainder interest in the present and future descendants of the person holding the remainder interest.
Background
At common law, conditions of survivorship are not implied with respect to future interests (whether in trust or otherwise). For example, in the simple case of a trust, “income to husband, A, for life, remainder to daughter, B,” B's interest is not defeated at common law if she predeceases A; B's interest would pass through her estate to her successors in interest (probably either her residuary legatees or heirs), who would become entitled to possession when A died. If any of B's successors in interest died before A, the interest held by that deceased successor in interest would likewise pass through his or her estate to his or her successors in interest; and so on.
The rationale for adopting a statutory provision reversing the common-law rule is to prevent cumbersome and costly distributions to and through the estates of deceased beneficiaries of future interests, who may have died long before the distribution date.
Subsection (a)
Subsection (a) imposes a condition of survivorship on future interests to the distribution date — defined as the time when the future interest is to take effect in possession or enjoyment.
Note that 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, such as the time of death of an income beneficiary.
Ambiguous survivorship language
Subsection (a) serves another purpose. It resolves a frequently litigated question arising from ambiguous language of survivorship, such as in a trust, “income to A for life, remainder in corpus to my surviving children.” Although some case law interprets the word “surviving” as merely requiring survival of the testator (e.g., Nass' Estate, 320 Pa. 380, 182 A. 401 (1936)), the predominant position at common law interprets “surviving“ as requiring survival of the life tenant, A. Hawke v. Lodge, 9 Del. Ch. 146, 77 A. 1090 (1910); Restatement of Property § 251 (1940). The first sentence of subsection (a), codifies the predominant common-law/Restatement position that survival relates to the distribution date.
The first sentence of subsection (a), imposes a condition of survivorship to the distribution date (the time of possession or enjoyment) even when an express condition of survivorship to an earlier time has been imposed. Thus, in a trust like “income to A for life, remainder in corpus to B, but if B predeceases A, to B's children who survive B”, the first sentence of subsection (a) requires B's children to survive the death of the income beneficiary, A.
Rule of construction
Note that Section 2-707 is a rule of construction. It is qualified by the rule set forth in Section 2-701, and thus it yields to a finding of a contrary intention. Consequently, in trusts like “income to A for life, remainder in corpus to B whether or not B survives A”, or “income to A for life, remainder in corpus to B or B's estate”, this section would not apply and, should B predecease A, B's future interest would pass through B's estate to B's successors in interest, who would become entitled to possession or enjoyment at A's death.
Classification
Subsection (a) renders a future interest “contingent” on the beneficiary's survival of the distribution date. As a result, future interests are “nonvested” and subject to the Rule Against Perpetuities. To prevent an injustice from resulting because of this, the Uniform Statutory Rule Against Perpetuities, which has a wait-and-see element, is incorporated into the Code as Part 9 of Article 2.
Substitute gifts
Section 2-707 not only imposes a condition of survivorship to the distribution date; like its antilapse counterparts, Sections 2-603 and 2-706, it provides substitute takers in cases of a beneficiary's failure to survive the distribution date.
The statutory substitute gift is divided among the devisee's descendants “per capita at each generation” a term defined in Section 2-709(b).
Subsection (a)(1) — Future Interests Not in the Form of a Class Gift: Subsection (a)(1) applies to non-class gifts, such as the “income to A for life, remainder in corpus to B” trust discussed above. If B predeceases A, subsection (a)(1)creates a substitute gift with respect to B's future interest; the substitute gift is to B's descendants who survive A.
Subsection (a)(2) — Class Gift Future Interests. Subsection (a)(2) applies to class gifts, such as in a trust “income to A for life, remainder in corpus to A's children”. Suppose that A had two children, X and Y. X predeceases A; Y survives A. Subsection (a)(2) creates a substitute gift with respect to any of A's children who predecease A leaving descendants who survive A. Thus, if X left descendants who survived A, X's descendants would take X's share; if X left no descendants living at A's death, Y would take it all.
Subsection (a)(2) does not apply to future interests to classes such as “issue”, “descendants”, “heirs of the body”, “heirs”, “next of kin”, “distributees”, “relatives”, “family”, or the like. The reason is that these types of class gifts have their own internal systems of representation, and so the substitute gift provided by subsection (a)(1) would be out of place with respect to these types of future interests. The first sentence of subsection (c) does apply, however. For example, suppose a nonresiduary devise “to A for life, remainder to A's issue, by representation”. If A leaves issue surviving him, they take. But if A leaves no issue surviving him, the testator's residuary devisees are the takers.
Subsection (b)
Since it is possible that, after the application of subsections (a) and (b), there are no substitute gifts, a back-stop set of substitute takers is provided in subsection (d) — the transferor's residuary devisees or heirs. Note that the transferor's residuary clause is treated as creating a future interest and, as such, is subject to this section. Note also that the meaning of the back-stop gift to the transferor's heirs is governed by Section 2-711, under which the gift is to the transferor's heirs determined as if the transferor died when A died. Thus there will always be a set of substitute takers, even if it turns out to be the state. If the transferor's surviving spouse has remarried after the transferor's death but before A's death, he or she would not be a taker under this provision.
Examples
The application of Section 2-707 is illustrated by the following examples. Note that, in each example, the “distribution date” is the time of the income beneficiary's death.
Example 1
A nonresiduary devise in G's will created a trust, income to A for life, remainder in corpus to B if B survives A. G devised the residue of her estate to a charity. B predeceased A. At A's death, B's child, X, is living.
Solution: On A's death, the trust property goes to the charity, not to X. Because B's future interest is not in the form of a class gift, subsection (a)(1) applies, not (a)(2). Subsection (a)(1) does not create a substitute gift with respect to B's future interest to B’s child, X, because the words of survivorship attached to B's future interest (“to B if B survives A”) indicate an intent contrary to the creation of that substitute gift.
Example 2
Same as Example 1, except that B left no descendants who survived A.
Solution: Same as Example 1.
Example 3
G created an irrevocable inter-vivos trust, income to A for life, remainder in corpus to B if B survives A. B predeceased A. At A's death, G and X, B's child, are living.
Solution: G takes the trust property by reversion. Because B's future interest is not in the form of a class gift, subsection (a)(1) applies, not (a)(2). Subsection (a)(1) does not create a substitute gift with respect to B's future interest: the words of survivorship (“to B if B survives A”) indicate an intent contrary to the creation of a substitute gift.
Example 4
G created an irrevocable inter-vivos trust, income to A for life, remainder in corpus to B if B survives A; if not, to C. B predeceased A. At A's death, C and B's child are living.
Solution: C takes the trust property. Because B's future interest is not in the form of a class gift, subsection (a)(1) applies, not (a)(2). Subsection (a)(1) does not create a substitute gift with respect to B's future interest: the words of survivorship (“to B if B survives A”) indicate an intent contrary to the creation of that substitute gift.
Example 5
G created an irrevocable inter-vivos trust, income to A for life, remainder in corpus to B, but if B predeceases A, to the person B appoints by will. B predeceased A. B's will exercised his power of appointment in favor of C. C survives A. B's child, X, also survives A.
Solution: B's appointee, C, takes the trust property, not B's child, X. Because B's future interest is not in the form of a class gift, subsection (a)(1) applies, not (a)(2). Subsection (a)(1) does not create a substitute gift with respect to B's future interest: the words of survivorship (“to B if B survives A”) indicate an intent contrary to the creation of that substitute gift.
Example 6
G creates an irrevocable inter-vivos trust, income to A for life, remainder in corpus to A's children who survive A; if none, to B. A's children predecease A, leaving descendants, X and Y, who survive A. B also survives A.
Solution: On A's death, the trust property goes to B, not to X and Y. Because the future interest in A's children is in the form of a class gift, subsection (a)(2) applies, not (a)(1). Subsection (a)(2) does not create a substitute gift with respect to the future interest in A's children: the words of survivorship (“to A's children who survive A”) indicate an intent contrary to the creation of that substitute gift.
Alternative Facts: One of A's children, J, survives A; A's other child, K, predeceases A, leaving descendants, X and Y, who survive A. B also survives A.
Solution: J takes the entire trust property. Although there is an alternative future interest (in B) and although B did survive A, the alternative future interest was conditioned on none of A's children surviving A. Because that condition was not satisfied, the expressly designated beneficiary of that alternative future interest, B, is not entitled to take in possession or enjoyment.
Example 7
G created an irrevocable inter-vivos trust, income to A for life, remainder in corpus to B if B survives A; if not, to C. B and C predecease A. At A's death, B's child and C's child are living.
Solution: Subsection (a)(1) produces a substitute gift only with respect to C's future interest. B's future interest is expressly conditioned on B's surviving A. C's future interest is conditioned on B's predeceasing A and C's surviving A. The condition that C survive A does not arise from express language in G's trust but from the first sentence of subsection (a); that sentence makes C's future interest contingent on C's surviving A. Thus, because neither B nor C survived A, neither B nor C is entitled to take in possession or enjoyment. C's child takes under the substitute gift.
Example 8
G created an irrevocable inter-vivos trust, income to A for life, remainder in corpus to A's children who survive A; if none, to B. All of A's children predecease A. X and Y, who are descendants of one or more of A's children, survive A. B predeceases A, leaving descendants, M and N, who survive A.
Solution: On A's death, the trust property passes to M and N.
Subsection (a)(2) does not produce substitute gifts with respect to A's children who predeceased A leaving descendants who survived A. Subsection (a)(1) creates a substitute gift with respect to B's future interest. B's future interest is conditioned on none of A's children surviving A and on B's surviving A. The condition of survivorship as to B's future interest does not arise because of express language in G's trust but because of the first sentence of subsection (a); that sentence makes B's future interest contingent on B's surviving A. Thus, because none of A's children survived A, and because B did not survive A, none of A's children nor B is entitled to take in possession or enjoyment. B's descendants, M and N, take under the substitute gift.
Example 9
G's will devised property in trust, income to niece Lilly for life, corpus on Lilly's death to her children; should Lilly die without leaving children, the corpus shall be equally divided among my nephews and nieces then living, the child or children of nieces who may be deceased to take the share their mother would have been entitled to if living.
Lilly never had any children. G had 3 nephews and 2 nieces in addition to Lilly. All 3 nephews and both nieces predeceased Lilly. A child of one of the nephews survived Lilly. One of the nieces had 8 children, 7 of whom survived Lilly. The other niece had one child, who did not survive Lilly. (This example is based on the facts of Bomberger's Estate, 347 Pa. 465, 32 A.2d 729 (1943).)
Solution: The trust property goes to the 7 children of the nieces who survived Lilly. Subsection (a)(2) does not create a substitute gift to the nephew's child or to the one niece's only child, deceased, because the words of survivorship indicate an intention contrary to the creation of that substitute gift. The expressly designated beneficiaries of the alternative future interest, the 7 children of the nieces, are living at Lilly's death and are entitled to take in possession or enjoyment.
Example 10
G devised the residue of his estate in trust, income to his wife, W, for life, remainder in corpus to their children, John and Florence; if either John or Florence should predecease W, leaving descendants, such descendants shall take the share their parent would have taken if living.
G's son, John, survived W. G's daughter, Florence, predeceased W. Florence never had any children. Florence's husband survived W. (This example is based on the facts of Matter of Kroos, 302 N.Y. 424, 99 N.E.2d 222 (1951).)
Solution: John, of course, takes his half of the trust property. Because Florence left no descendants who survived W, subsection (a)(1) does not create a substitute gift with respect to Florence's future interest in her half. Subsection (b)(1) is inapplicable because G's trust was not created in a nonresiduary devise or in a codicil to G's will. Subsection (b)(2) therefore becomes applicable, under which Florence's half goes to G's heirs determined as if G died when W died, i.e., John. See Section 2-711.
Massachusetts Comment
Chapter 140 of the Acts of 2012 deleted subsection (a), renumbered subsections (b) and (c) as (a) and (b) respectively; and changed the words “by representation” to read “per capita at each generation”.