Detailed answer — what can go wrong when you give the other owner a life estate?

Granting the other owner a life estate means that person (the life tenant) has the right to possess and use the property for the rest of their life. When they die, ownership (the remainder) passes to the remainderman you name. That arrangement solves some problems but creates a number of legal and practical risks in Washington that you should understand before choosing a life estate instead of selling the property.

Loss of control and flexibility

Once you grant a life estate via deed, you cannot freely sell, refinance, or change the property’s ownership without involving the life tenant. A life tenant usually must join in any conveyance that affects their possessory interest. This complicates attempts to cash out the property or make major decisions later.

Maintenance, repairs, taxes, insurance, and expenses

Disputes often arise about who pays what. Generally, a life tenant is expected to pay ordinary upkeep, property taxes, and insurance, and to avoid committing “waste” (actions that damage or permanently reduce value). The remainderman may be responsible for major structural repairs and mortgage principal unless the deed or a written agreement says otherwise. If the life tenant fails to pay taxes or insurance, liens can attach to the property and harm both interests.

Creditors and liens

Creditors of the life tenant may try to reach the life estate interest. Similarly, the remainderman’s creditors might affect the remainder interest. The exact rights of creditors depend on the facts and Washington law; a life estate does not completely shield the property from creditor claims.

Mortgage and refinancing problems

Most lenders will not make a loan secured only by a remainder interest. If there is an existing mortgage, the life tenant’s possession does not remove the mortgagee’s rights. If you need to refinance or borrow against the property later, the life estate makes that much harder.

Valuation, taxes, and capital gains complications

Determining the fair market value of a life estate and the remainder can be complex. The IRS has valuation rules for life estates, and tax consequences (including basis and capital gains) depend on how the interests were created. Washington’s property tax rules and any transfer or documentary excise tax implications may also apply at conveyance or when the remainder vests.

Medicaid, long‑term care, and transfer rules

Creating a life estate can affect eligibility for Medicaid or produce an estate recovery claim in some circumstances. Medicaid programs often scrutinize asset transfers and may impose penalties or claim recovery against property that was transferred for less than full value. Check Washington Department of Social and Health Services rules before making transfers if long‑term care planning is relevant.

Risk of litigation with co‑owners

Disagreements over rent, occupancy, repairs, or sale can lead to lawsuits. A co‑owner who holds a life estate or a remainder interest can sometimes force a partition action to divide or sell the property. Washington’s statutes on partition govern how courts handle such disputes: see the partition statute at RCW Chapter 7.28 (Partition).

Improvements and waste

The life tenant must avoid voluntary waste (acts that damage or reduce value) and is typically not entitled to demand reimbursement for improvements unless the deed or a later agreement allows it. That can create tensions when the life tenant makes or refuses to make changes.

Succession and estate planning conflicts

A life estate changes how the property passes at death. If family members expected to inherit differently, the life estate may create unanticipated obligations and fights. Make sure a life estate aligns with the rest of your estate plan and any beneficiary designations.

Practical summary

In short: while a life estate can preserve a loved one’s right to live in a home and avoid immediate sale, it creates long‑term complexity — limited ability to sell or refinance, potential disputes over maintenance and expenses, valuation and tax consequences, Medicaid/benefit risks, and possible creditor claims or partition lawsuits.

Relevant Washington rules to review

• Partition actions: RCW Chapter 7.28 (how courts divide or order sale of real property held by multiple owners).
• Recorded instruments and deeds: review the Washington statutes and county recording rules for how deeds creating life estates must be recorded; search Washington RCW chapters on conveyances and recording at the official RCW site: https://app.leg.wa.gov/rcw/.

When a life estate might be appropriate

Despite the risks, a life estate can make sense when you want to:

• allow someone to remain in the home for life but transfer the ultimate ownership to others;
• avoid probate for the property by using a deed that creates the remainder interest;
• protect a surviving spouse’s use of the property while preserving value for children or other beneficiaries.

However, you should only choose this tool after weighing the costs and planning to address the common pitfalls below.

Helpful hints — practical steps to reduce risk

• Get a written agreement. Create a separate co‑owner agreement or add deed language that clarifies who pays taxes, insurance, utilities, and major repairs.
• Put obligations in the deed. Specify duties for maintenance, the handling of mortgages or liens, and who can sell or encumber the property.
• Consider buy‑out or sale triggers. Include a buy‑out formula or a mechanism to sell the property if certain events occur (serious disagreement, inability to maintain, or need for long‑term care).
• Address tax and Medicaid consequences. Talk with an attorney or elder law planner about Medicaid look‑back rules and potential estate recovery.
• Get a valuation. Have an appraiser value the life estate and the remainder if you need to create fair compensation terms between parties.
• Title and recording review. Ensure the deed and title documents are prepared and recorded correctly with your county auditor to avoid clouded title later.
• Consider alternatives. A sale, a tenancy‑in‑common agreement, or a trust might achieve your goals with fewer headaches. For example, placing the property in a living trust may preserve management flexibility while avoiding probate.
• Talk to a Washington property lawyer. Local counsel can draft deed language, advise on tax and Medicaid effects, and explain how state law applies to your facts.