Assuming that the donor retains an interest in the property, the donor may not need to keep a life estate in order to be allowed to occupy the property (or to avoid paying rent to the other co-owners). The last time I looked for Texas, each co-owner is permitted to occupy the property (but not exclude the other co-owners) and need not pay any rent or otherwise account for any implied rent because co-ownership carries with it the right to occupy the property. All of my discussion presumes that the co-owners do not have some kind of agreement among owners.

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Well and good but the problem lies in the life estate which is deemed to be retained by the donor. Gifting one-half of the property is not mutually exclusive with the federal estate tax result of full inclusion in the donor's estate. The mere right of undivided interest holders to occupy the property will not carry the day given the donor's continued enjoyment of the entire home up to and including the date of death.

Allbest
HJ