second amendment

mistrusting us bank -- august 11, 2003
filed after august 5, 2003 meeting & after further review of accounting

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FILED AUGUST 11, 2003

SECOND AMENDMENT RESPONSE TO THE RESPONSE FROM US BANK

IN THE MATTER OF THE
IRREVOCABLE TRUST
IN THE ESTATE OF
XXXXXXXXXXXXX

 

COMES NOW, XXXXXXXX and XXXX, residual beneficiaries of the XXXXXX Trust, and upon further review of submitted accounting by U.S. Bank, to further amend and clarify their response to the response to objections by XXXXXXXX, Trustee for U.S. Bank and Trustee Agent on its behalf for the XXXXXXXX. Trust, filed with the Court on July 14, 2003 and further responded to by the Trustee in the meeting of August 5, 2003 with U.S. Bank. XXXXXXXX and XXXXXXXX state to the Court the following:

1. The farm land asset is referenced as “Undivided 1/2 Interest in 651 Acres Located in Sections 2, 9, 15, 16 & 33 T72N-R36W” in the accounting submitted on May 16, 2003 by said trustee, U.S. Bank.

2. The farm land asset was a part of the Trust for the entirety of 2002 and continues to be a part of the Trust as of August 2003, pending litigation. During this period, the farm land accounted for approximately 25 percent of the Assets in the Trust. The farm land asset, including all expenditures, revenue, net revenue, income and net income for the farm, needs yet to be completely and properly accounted for by the trustee, U.S. Bank, in the annual accounting. The accounting submitted on May 16, 2003 is lacking in many of those financial details. Said beneficiaries, XXXXXXXX and XXXXXXXX, have already stated to the Court that the accounting did not account for all property. Said beneficiaries have also noted the absence of these financial details in the accounting in the meeting of August 5, 2003 with said trustee, U.S. Bank, and its trustee agent, XXXXXXXX.

3. Said trustee, U.S. Bank, submitted an accounting on May 16, 2002 that did not include the value of the farm land asset on page 1, nor on page 4, nor in the column marked “Market Value” on page 2 of the accounting from U.S. Bank. On page 2, the Market Value of the farm land is registered as zero dollars. This number is entirely incorrect. By registering a zero dollar Market Value on the land, the total Market Value for the Assets of the Trust is likewise incorrect at the calculated figure of $X,XXX,XXX.XX. The Total Market Value as stated in the Accounting on page 2 and then on page 1, is thus wrong. As a consequence, the percentages of total for each asset stated on page 2 are also incorrect, since a zero percentage is registered for the farm land. The figure does not account for the farm land, which accounts for approximately 25 percent of the Assets and should be noted as such a percentage. The dollar value of the farm land is also conspicuously missing from the list of transactions detailed on page 4 of the accounting. Additionally, the farm land is represented on page 4 by said trustee as having been received on August 14, 2002. This date is incorrect since the farm land has been a part of the Trust since its inception. Said trustee was responsible for accounting for the farm land throughout 2002.

4. Said trustee, U.S. Bank, appears to assume in the accounting for 2002 that the farm land was not a part of the Trust in 2002. This assumption is entirely incorrect.

5. Said trustee, U.S. Bank, submitted an accounting that shows a Total Investment Return and a Total Rate of Return that does not account for the farm land asset and for the Return on the farm land asset. The net income on the farm land asset for 2002 is not accounted for in the Sources of Return on page 3 of the accounting. As a consequence, the Total Return of $15,535.55 is incorrect. As an additional consequence, the Total Rate of Return of 5.49% is also incorrect. Additionally, the Total Rate of Return does not account for the effect of the Trustee’s request for compensation of 5,600 dollars on the Total Rate of Return.

6. Said trustee, U.S. Bank, submitted an accounting that does not provide for an actual Annual Income for the Trust for 2002 on page 1. Instead, said trustee provided an “Est. Annual Income” or otherwise an Estimated Annual Income. Not only does the stated Annual Income not include the farm income, the stated Annual Income does not include actual Income for the Taxable Bonds, for Tax-Exempt Bonds and for Cash/Money Market Funds.

7. Said trustee, U.S. Bank, could have provided the correct figures for the actual Income on Bonds and on Tax-Exempt Bonds in the accounting by referring to end-of-2002, consolidated statements from Edward Jones Brokerage addressed to U.S. Bank and dated January 11, 2003. Per Edward Jones, the correct Interest Income for Tax-Exempt Bonds was $31,644.65, which is different from what was stated as estimated income for Tax-Exempt Bonds on page 1. Per Edward Jones, the correct Interest Income for Taxable Bonds was $7,375, which is what was provided as the estimated amount. Ordinary Dividends and Accrued Interest Paid by Trust on Municipal Purchaes must also be factored in. The Dividends noted on page 3 do not include the Dividends from Edward Jones. It is not clear why U.S. Bank did not provide actual figures for the 2002 accounting on page 1 when originally submitted on May 16, 2003.

8. Said trustee, U.S. Bank, submitted an accounting that does not explain what time duration was used to derive the dollar figures for Net Change in Asset Value and for Change in Accrued Income. Even as the headers suggest that the period accounted from is “5/30/02-12/31/02” or six months of 2002, it still remains unclear as to the exact time durations which said trustee, U.S. Bank, is using to calculate those figures. There seems to be no reason that said trustee could not have reviewed Edward Jones Brokerage records so as to determine what the actual Net Change in Asset Value and Change in Accrued Income for Taxable and Non-Taxable Bonds were for the entirety of 2002. The absence of actual figures for the entire year and with the farm land asset and income included, results in an inaccurate Total Investment Return and Total Rate of Return.

9. Said beneficiaries, XXXXXXXX and XXXXXXXX request an explanation for the Total Account Accrued Income of $12,595.74 on page 2 of the accounting and on page 3 of the accounting. They request information on the method of calculating and the sources for this amount. They also request the actual duration of 2002 accounted for in this dollar figure for accrued income.

10. Said beneficiaries, XXXXXXXX and XXXXXXXX, request that the Trustee, U.S. Bank, provide dates for the duration represented by the Net Change in Asset Value on page 3 of the accounting. Mostly all of the assets referenced by this figure were not claimed to have been marshaled by said trustee, U.S. Bank, until December 24, 2002, so it would appear that the number is based only on a six day period from December 24, 2002 to December 31, 2002 and not the 10 months during 2002 for which the trustee, U.S. Bank, is responsible for providing an annual accounting. Additionally, the fact that Bonds are currently worth more due to the current decrease in interest rates, also needs to be factored in, since any increase in Asset Value for Bonds may only be temporary. XXXXXXXX and XXXXXXXX additionally request a separate Rate of Return for 2002 that is not calculated based on possible fluctuations in Bond prices.

11. Said beneficiaries, XXXXXXXX and XXXXXXXX, request that the accounting include an itemization of the Return on the Edward Jones Investments during 2002.

12. Said trustee, U.S. Bank, does not provide an explanation for how it derived the figures for Investment Costs on page 2 of the accounting and what dates have been used to determine the Investment Cost.

13. Said beneficiaries, XXXXXXXX and XXXXXXXX continue to question why said assets from Edward Jones were not marshaled until December 24, 2002, even as they had been regularly appearing on U.S. Bank checking statements since the start of U.S. Bank’s tenure as trustee of the XXXXXXXX Trust on February 26, 2002. It is equally questionable why December 24, 2002 is the date provided for the Cash Receipts of Sold Corn, especially in consideration of the fact that corn has always been sold in the summertime and never in December. Said beneficiaries question why so much activity for 2002 did not transpire until December 24, 2002 even as the trustee, U.S. Bank, and trustee agent, XXXXXXXX, was appointed on February 26, 2002.

14. Said trustee, U.S. Bank, has not provided an accounting of the receipt of funds from the Farm Direct/Counter Program for 2002. No direct deposit nor accounting for this Cash Receipt appears on any accounting or statements provided by U.S. Bank. The Receipt for CRP Payment (or Conservation Reserve Payment) on December 3, 2002 is not the same since it is a separate farm subsidy payment for the use of buffer strips.

15. Said beneficiaries, XXXXXXXX and XXXXXXXX request an explanation for the repetitive buying and selling of shares/units in the [ ]Fund after September 19, 2002 and through December 19, 2002 on page 7 of the accounting. XXXXXXXX and XXXXXXXX question the necessity and strategy of trading in and out of that same fund over a short period. They question the strategy and motive of the trustee in trading small amounts of shares/units when the initial purchase was 206,334.67 units. They request an accounting of the per share dollar value for each of those individual purchases and sales were made by said trustee. This dollar value per share is necessary to help account for the trust and investment fees of $148.58 claimed by U.S. Bank as Fees Charged to Income on page 6 of the accounting. XXXXXXXX and XXXXXXXX request the actual profit or loss from trading in and out of the First American Prime Oblig Fund. They also request the same information about the Trustee’s activities with this fund on behalf of the Trust through the current date of August 2003.

16. Said beneficiaries, XXXXXXXX and XXXXXXXX note to the Court that there is no accounting on Interest Receipts for the First American Prime Oblig Fund from December 1, 2002 to December 31, 2002. There is also no accounting for the actual Interest Rates on this Fund during the period from 9/1/02 through 12/31/02 when units were purchased and sold.

17. Said beneficiaries, XXXXXXXX and XXXXXXXX note again to the Court that Attorney XXXXXXXX was Trust Attorney during the year 2002. Yet the Law Firm of Attorney XXXXXXXX is claiming services dated before December 31, 2002. There are no stated dates on the itemization of services from the Law Firm of XXXXXXXX. XXXXXXXX and XXXXXXXX were not aware that Attorney XXXXXXXX had been employed by said trustee prior to January 2003. They question the date on which he was first employed by said Trustee.

18. Said beneficiaries, XXXXXXXX and XXXXXXXX do question payment for two services rendered by the Law Firm of XXXXXXXX. XXXXXXXX and XXXXXXXX question the review and receipt of documents from the XXXXXXXX Law Firm regarding the Trust. The XXXXXXXX Law Firm claims to represent other beneficiaries to the Trust, including residual beneficiary XXXXXXXX, and neither XXXXXXXX nor XXXXXXXX were informed of this direct consultation with the XXXXXXXX Law Firm. XXXXXXXX and XXXXXXXX thus request exact dates for this written consultation. They also question the office conference with Attorney XXXXXXXX to review pending trust matters. As beneficiaries, they request specification of what those trust matters were. They question whose interests were being served by those meetings with Attorney XXXXXXXX.

19. Said trustee, U.S. Bank, has requested that the Court permit it to retain and dispose of assets and investments at its discretion. The attempt by said trustee U.S. Bank to dispose of the farm land asset, when said trustee has not yet properly accounted for all expenses, revenue, net income and rate of return on the farm land during 2002 nor created a lease with the farm tenant for neither 2002 nor 2003, suggests that such discretion granted to said Trustee may actually jeopardize the income and return on the Trust by permitting the Trustee unchecked discretion to remove the most aggressive assets, to not diversify, to not account for major assets such as the farm land in the annual accounting, to not actually provide a proper annual accounting apart from the initial report, to privilege the interests of the residual beneficiary, XXXXXXXX, and to not keep all beneficiaries reasonably informed as specified in the Iowa Probate Code.

WHEREFORE, the undersigned, XXXXXXXX and XXXXXXXX, continue to not approve of the initial report nor the accounting by said trustee, U.S. Bank, and trustee’s agent, XXXXXXXX. The undersigned do not approve of the acts of U.S. Bank as trustee for the XXXXXXXX. Trust, and do hereby request that the Court remove and replace U.S. Bank and/or XXXXXXXX with a different trustee, preferably one from XXXXXXX in Des Moines.

The undersigned certify under penalty of perjury and pursuant to the laws of the State of Iowa that the preceding is true and correct.