Lesson II: I went to ABA Trust School and This is What I Learned - Estate Settlement is Like Building IKEA Furniture (But With Higher Stakes)

Part 2 of a series on insights from ABA Trust School Level II

In the American Bar Association's Trust School Level II this past June, I sat through what can only be described as the estate settlement equivalent of an IKEA instruction manual. You know the feeling—you've got all these pieces scattered across your living room floor, a cryptic diagram that may or may not match reality, and the sneaking suspicion that you're missing a crucial screw that will become apparent only after you've assembled everything backwards.

Except in estate settlement, that missing screw could cost your client's family hundreds of thousands in unnecessary taxes.

The Five Pieces That Actually Matter

Here's what I learned about the mechanics that drive real outcomes in estate settlements—the stuff that separates the pros from the practitioners still hunting for that metaphorical Allen wrench.

1. Lifetime Gifts: The Gift That Keeps on... Taxing

Let's start with everyone's favorite surprise: lifetime taxable gifts reduce your available estate tax exemption and get added back when calculating estate tax.

Picture this scenario: Your high-net-worth client, let's call him Bob, thought he was being clever by gifting $2 million to his kids back in 2018. "Look at me," Bob probably said to his golf buddies, "moving assets out of my estate like a boss."

Fast forward to 2025. Bob dies with a gross estate of $12.16 million. After $100,000 in estate expenses, we're at $12.06 million taxable estate. But here's the kicker—we have to add back that $2 million lifetime gift, in calculating the tentative tax base under IRC § 2001(b), not to the gross estate itself, bringing our computation base to $14.06 million. The estate tax gets calculated on this larger amount, and any gift tax Bob paid earlier gets subtracted later as a credit under IRC § 2012.

Bob's family just learned that gifts aren't magical estate-shrinking devices. They're more like a credit card—you can use the credit now, but you're still on the hook for the full amount later. The unified transfer tax system doesn't care when you made the transfer, just that you made it.

2. Portability: The $14 Million Checkbox

Portability must be affirmatively elected via a timely Form 706 filing. This one keeps me up at night—not because it isn't understood, but because it's so easy for this critical step to fall through the cracks in a busy practice.

Here's the scenario that keeps me up at night: Sue and Bob have a combined estate worth $20 million. Bob dies first with only $4 million in his name. "No big deal," thinks their attorney, "Bob's estate is way under the $13.99 million exemption for 2025. No Form 706 needed."

Wrong. Dead wrong. Catastrophically wrong.

If they don't file that Form 706 to elect portability, Sue loses Bob's unused exclusion of $9.99 million forever. When Sue dies later with the remaining $16 million, her estate pays tax on $2.01 million instead of getting a free pass. At current rates, that's about $800,000 in unnecessary federal estate tax.

Eight hundred thousand dollars. For failing to check a box and file a form.
Note: If the estate misses the regular deadline, simplified late election relief may be available for up to five years under Rev. Proc. 2022-32.

This is exactly why we built Estateably—because in 2025, "I forgot to file the form" shouldn't be a reason families lose generational wealth. When we started the company, I thought issues like this would be straightforward to solve with better systems. Just track the important deadlines, organize the data better, done. But sitting in Trust School, I realized the real challenge isn't the reminder—it's the decision-making process. Should you elect portability for a $500K estate if the surviving spouse has their own $15 million? The software can surface the question and keep you organized, but the practitioner still needs to understand the strategic implications.

3. Form 706: The Ultimate Adult Coloring Book

The 706 form mechanics mirror the conceptual flow of estate tax calculation. Think of Form 706 as the world's most expensive coloring book, where staying inside the lines can save your clients millions.

The form walks you through a logical progression:

• Schedule A through I: List everything in the gross estate (real estate, stocks, life insurance, jointly owned property, etc.)
• Schedule J: Funeral and admin expenses (the cost of dying bureaucratically)
• Schedule K: Claims against the decedent (what Bob still owed when he checked out)
• Schedule L: Casualty losses during estate administration (because Murphy's Law applies to dead people too)
• Schedule M: Marital deduction (the surviving spouse's get-out-of-tax-free card)

Each schedule is a puzzle piece. Miss one, and the whole picture falls apart. Get them all right, and you've just navigated one of the most complex areas of tax law without destroying a family's financial future.

As a software founder, I originally thought we could just digitize Form 706—turn those schedules into clean data entry screens and call it innovation. What I learned at Trust School is that the form itself isn't the problem. The problem is that most firms are tracking these assets across seventeen different spreadsheets, three filing cabinets, and someone's handwritten notes from 2019. The form mechanics work beautifully when you have clean, organized data feeding into them. They become a nightmare when you're frantically searching for that life insurance policy number at 11 PM before the filing deadline.

4. The Prize Nobody Wants to Win

Quick sidebar: Prizes, awards, and giveaways are treated as income, not gifts. I mention this because somehow, every year, we hear from practitioners whose clients swear that their $50,000 sweepstakes win or game show prize should count as a gift for planning purposes. The client logic makes sense—"I didn't work for this money, someone just gave it to me"—but tax law doesn't care about the effort involved. NBC isn't making annual exclusion gifts to Wheel of Fortune contestants. That's income, folks - prizes are treated as gross income under IRC § 74, not excluded under the gift provision of § 102. Different rules, different forms, different headaches for you to explain to confused beneficiaries.

5. Title vs. Contribution: The Ultimate Relationship Test

Always confirm title vs. contribution when evaluating joint accounts and community vs. separate property. This is where estate settlement gets personal—and where attorneys earn their fees.

For married couples in common-law states, joint ownership is straightforward: under IRC § 2040(b), 50% of qualified joint interests is included in the gross estate. But for non-spouses? The entire value gets included in the decedent’s gross estate under IRC § 2040(a). Suddenly, that joint account with mom becomes a forensic accounting exercise stretching back decades.

Community property states flip this script entirely. In Texas, California, and the other community property jurisdictions, it doesn't matter who earned the money or whose name is on the title—if it was acquired during marriage, it's half-and-half. But here's the kicker: both halves get a step-up in basis when one spouse dies under Rev. Rul. 87-98, assuming the asset is community property, even though only one half is included in the gross estate.

This isn't just tax trivia. This is the difference between a surviving spouse paying capital gains on decades of appreciation versus getting a clean slate for income tax purposes.

Here's what makes this particularly maddening from a technology perspective: every single firm I talk to has their own ad hoc system for tracking asset ownership and contribution history. Some use Excel. Some use legal pads. Some just "remember" and hope for the best. The legal rules may be well-established, but the data gathering is pure chaos. We've spent months building workflows that help systematically capture this ownership information, but the real innovation isn't in complex logic. It's in creating systems that actually prompt the right questions upfront instead of hoping someone remembers to ask them during crunch time.

The Modern Estate Settlement Reality

Trust School highlighted that the legal principles are sophisticated and well-reasoned, but the administrative tools supporting them haven't evolved much since the 1970s. The tax code may be complex, but the systems we use to navigate it could be so much better.

The challenges I described above—tracking portability elections, organizing lifetime gift records, managing title-versus-contribution documentation—these aren't insurmountable legal puzzles. They're organizational challenges that excellent attorneys wrestle with because the infrastructure hasn't kept pace with the complexity of modern practice.

But here's the founder's perspective that Trust School crystallized for me: software isn't supposed to make attorneys smarter—it's supposed to make their expertise more accessible and their processes more reliable. I used to think our job was to automate estate administration. What I learned is that our job is to amplify good legal thinking by eliminating the administrative friction that can bury it.

When a skilled attorney knows they need to check for lifetime gifts but has to spend three hours hunting down old 709 forms, that's not a knowledge gap. That's a data organization challenge. When they understand portability perfectly but miss it because they're managing forty other critical deadlines, that's not a competency issue. That's a workflow design opportunity.

The best legal minds shouldn't be spending their time on archaeological digs through client files. They should be focused on the sophisticated planning strategies that create real value for families.

Our clients deserve better infrastructure. They deserve technology that organizes lifetime gift records systematically, surfaces important elections at the right time, and helps navigate complex forms without losing crucial details.

They deserve estate settlement that works as elegantly as the legal framework intended, supported by tools that match the sophistication of the work.

What This Means for Your Practice

Understanding these mechanics isn't just about passing the next CLE exam. It's about recognizing that estate settlement in 2025 demands both deep technical knowledge and modern execution tools.

The attorneys and fiduciaries who thrive in the next decade won't be the ones who memorize every tax code section. They'll be the ones who understand the underlying principles well enough to leverage technology that handles the mechanical complexity while preserving the strategic thinking that only humans can provide.

As someone who's spent the last few years building software for this industry, Trust School reinforced something I see in our user data every day: the firms that embrace systematic processes don't just make fewer mistakes—they take on more complex cases and serve clients at a higher level. When you're not worried about forgetting a deadline or losing track of an asset, you can focus on the sophisticated planning strategies that create real value.

The irony is that the most tech-forward firms aren't the ones replacing human expertise—they're the ones multiplying it.

Because at the end of the day, estate settlement shouldn't feel like assembling IKEA furniture. It should feel like what it actually is: the final act of stewarding someone's life's work toward the people and causes they cared about most.

And unlike IKEA furniture, we can't just throw out the instructions and wing it.

Legal Disclaimer: This article is for informational purposes only and does not constitute legal or tax advice. Practitioners should consult the Internal Revenue Code, Treasury Regulations, and IRS guidance—or seek professional counsel—before applying these concepts to specific client situations.

‍