Short answer: Giving a co-owner a life estate (so they have the right to use the property for the rest of their life and someone else holds the remainder interest) can solve division without an immediate sale, but it creates lasting legal and financial risks for both the life tenant and the remainderman. Under Hawaii law, those risks include problems with maintenance, taxes, creditor claims, refinancing or selling, Medicaid or benefit recovery exposure, and the possibility of future court disputes. This article explains those issues, practical consequences, and steps you can take to reduce risk.

What a life estate is (plain language)

A life estate means one person (the life tenant) has the right to occupy, use, and receive income from a property during their lifetime. When the life tenant dies, ownership automatically passes to the remainderman (the person who holds the remainder interest). The life tenant does not hold full fee simple ownership and typically cannot sell the property free of the remainder interest.

Major risks and practical problems

1. Responsibility for maintenance and repairs
   The life tenant is normally responsible for ordinary maintenance and property upkeep. Major repairs and capital improvements may be contested. If the life tenant fails to maintain the property, the remainderman can sue for waste, but court remedies are costly and slow. Conversely, if the remainderman wants improvements, they typically must pay for them or negotiate reimbursement.
2. Taxes, assessments, and liens
   Property taxes and special assessments must be paid. If unpaid, the property can be subject to tax sale or liens that harm both life tenant and remainderman. Clarify who pays taxes and how shortfalls are handled.
3. Mortgage and refinancing difficulties
   A life estate complicates financing. A life tenant usually cannot refinance a mortgage that encumbers the remainder interest without the remainderman’s consent. Lenders may refuse loans or require the remainderman to join. Existing mortgages remain binding; the life tenant alone is often unable to obtain new loans secured solely by the life estate.
4. Limits on selling and marketability
   A life tenant can sell or transfer only their life interest; buyers pay less because the buyer’s interest ends at the tenant’s death. The remainderman’s interest also can be sold, but together the life estate and remainder can still be hard to market. Title insurance and clear marketable title issues often require legal work.
5. Creditor claims and risk of attachment
   Creditors of the life tenant can often attach the life tenant’s interest, reducing value for the remainderman. Conversely, creditors of the remainderman may pursue the remainder interest. Both parties should understand who’s exposed to which debts.
6. Medicaid and public benefits exposure
   Granting a life estate can have unintended consequences for eligibility for long-term care benefits and for estate recovery after death. Life estates may be treated differently by Medicaid and other programs; consider consulting an elder law attorney before creating a life estate if public benefits or long‑term care are concerns.
7. Partition and litigation risk
   If co-owners later disagree, the remainderman or life tenant could bring a partition action or other lawsuit to resolve disputes. Partition remedies can result in forced sale or court-ordered division—often costly and unpredictable.
8. Insurance and casualty loss allocation
   Who must carry hazard insurance and who is responsible if the property is damaged? Insurance proceeds may be split between life tenant and remainderman based on the type of loss and ownership interests, which can lead to conflict.
9. Estate planning and unintended transfers
   A life tenant’s will generally cannot transfer the life estate beyond their death (because it ends at death). The remainderman’s interest will pass according to their deed or will. Misunderstandings can frustrate estate plans of either party.

Common hypothetical scenarios and consequences

Example A — Elderly parent and child: An elderly parent gives the child a life estate so the parent can continue to live there; the grantor keeps the remainder. If the parent later needs nursing care and Medicaid pays, the state may seek recovery from the parent’s remaining interest (depending on timing and other factors). The life estate may affect eligibility if created at the wrong time.

Example B — Co-owner conflict: Two siblings own property. One becomes life tenant; the other holds the remainder. The life tenant stops paying taxes and lets the roof fail. The remainder holder must sue for waste or pay for repairs and seek reimbursement — both expensive and time consuming.

How to reduce risk if choosing a life estate

• Put the agreement in writing. Draft the life estate deed carefully and record it.
• Define responsibilities clearly: who pays taxes, insurance, maintenance, utilities, and major repairs.
• Require insurance and specify beneficiaries or agreed distribution of insurance proceeds for casualty loss.
• Include an agreed dispute-resolution mechanism (mediation/arbitration) to avoid costly court fights.
• Consider buyout terms or an option to sell the remainder interest later, with agreed valuation method or right of first refusal.
• Address creditor exposure: consider title searches and clear liens before creating interests.
• Consult an estate planning or elder law attorney before creating a life estate if public benefits or long-term care is a realistic concern.
• Talk to lenders if there is an existing mortgage or if refinancing is likely; get lender consent or restructure the loan.

What legal remedies exist if problems arise

If parties disagree, Hawaii courts can resolve disputes about waste, accounting, partition, or enforcement of deed terms. Remedies include injunctions, money damages, partition by sale, or quiet title actions. These remedies can be slow and costly, so preventative drafting is usually the better choice.

For statutory reference and to review Hawaii law on real property and related topics, consult the Hawaii Revised Statutes at the Legislature’s official site: https://www.capitol.hawaii.gov/hrscurrent/. That site contains the current text of statutes governing conveyances, estates in land, and related matters.

Practical checklist before you grant a life estate

1. Obtain a current title report and clear any liens.
2. Confirm mortgage holder’s position and whether payoff or consent is needed.
3. Agree in writing on taxes, insurance, maintenance, and who pays what.
4. Discuss the long-term plan: who will own the remainder at the life tenant’s death, and does this align with estate plans?
5. Consider funding mechanisms for future repairs or liabilities (escrow, insurance, or a maintenance fund).
6. Speak with an estate planning and a real property attorney licensed in Hawaii to draft documents and explain tax, Medicaid, and probate consequences.

Helpful hints

• Do not rely on verbal agreements — record everything in a deed or written contract.
• Ask for a survey and full title search before creating new interests.
• Consider a life lease or long-term lease as an alternative if you want occupancy rights without altering title.
• Build an action plan for paying property taxes and insurance so the property is not subject to tax sale or liens.
• Keep receipts and document repairs; these records help if a dispute arises.
• If public benefits or nursing care are possible in the future, consult an elder law attorney early.