Professor Charles E. Rounds writes about the enforceability of a trust accounting clause’s failure-to-object provision (the non-judicial settlement of trustees’ accounts). His article begins as follows:
It is common for the accounting clause of an inter vivos trust instrument to contain a provision along the lines of the following: “The written approval of such an account by the person or persons thus entitled to such account (OR THE FAILURE TO OBJECT TO SUCH AN ACCOUNT WITH (60) DAYS AFTER IT IS RENDERED) shall as to all matters and transactions stated therein be final and binding upon all persons (whether in being or not) who are then or may thereafter become entitled to share in either the principal or the income of the trust or share for which the account is rendered, except to the extent that such accounting involves the enlargement or shifting of the beneficial interest of any beneficiary of the trust.”
Putting aside the inconvenient issue of whether a current beneficiary may bind in equity a future beneficiary when equitable property rights are at stake, I was brought up to take the failure-to-object feature with a grain/pinch of salt. From the trustee’s perspective it cannot hurt to have the failure-to-object arrow among the other arrows in defense counsel’s quiver, but shooting it off is unlikely to do much damage, absent very special facts. The newly-minted Restatement (Third) of Trusts suggests that such caution may be well-founded. It provides that, as a general rule, a beneficiary’s informed consent must be manifested by some affirmative act. “Consent or ratification ordinarily requires more than mere failure of the beneficiary to object to conduct that the beneficiary was aware would or did constitute a breach of trust (but cf. …[laches doctrine]…); the consent or ratification is normally expressly communicated to the trustee, orally or by delivery of a writing, although the consent or ratification may be implied by the beneficiary’s conduct in some circumstances.” See Restatement (Third) of Trusts § 96 cmt. b. One lawyer in a national law firm with a robust trust department of its own absolutely refuses to include a failure-to-object provision in his/her accounting clauses, at least when banks are the designated trustees. One wonders whether the trust instruments under which the lawyer and the lawyer’s partners are currently serving as trustee contain accounting clauses that also lack the failure-to-object feature. See generally §184.108.40.206. of Loring and Rounds: A Trustee’s Handbook (appointment of scrivener as trustee) [page 468-472 of the 2014 Edition].