(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.
(c) If no taker is produced by the application of paragraph (a) or paragraph (b), the property passes to those persons, including the state, and in such shares as would succeed to the transferor’s intestate estate under the intestate succession law of the transferor’s domicile if the transferor died when the disposition is to take effect in possession or enjoyment.
For purposes of paragraphs (b) and (c), the term “transferor” with respect to a future interest created by the exercise of a power of appointment, means the donor if the power was a nongeneral power and the donee if the power was a general power.
(5) Unless a contrary intent appears in the trust instrument, subsections (2)-(4) do not apply to an outright devise that vests upon the death of the settlor unless the beneficiary is a grandparent, or a lineal descendant of a grandparent, of the settlor or testator and the beneficiary:(a) Is dead at the time of the execution of the revocable trust or will;
(b) Fails to survive the settlor or testator; or
(c) Is required by the inter vivos trust or by operation of law to be treated as having predeceased the settlor or testator.
A devise in a revocable trust or a testamentary trust that is to take effect at the death of the settlor or testator does not vest until the death of the settlor or testator.
(6) Subsections (1)-(4) apply to all trusts other than trusts that were irrevocable before the effective date of this code. Sections 732.603, 732.604, and 737.6035, as they exist on June 30, 2007, continue to apply to other trusts executed on or after June 12, 2003. Subsection (5) applies to those trusts that become irrevocable after June 30, 2014. 
