I think there is a 2036 problem - a transfer with a retained interest in property. So the whole thing would be brought back into her estate at her death. (I don't believe there's any exception to 2036 treatment for life estates in a personal residence.) To correct this, she'd have to gift her life estate, which probably would be worth a lot, due to inflation, but depending on how old she is. You certainly wouldn't want to incur any gift tax at this point with the future of estate tax up in the air. Perhaps, if she is quite elderly, you could lower the value of the gift of the life estate by putting it into a QPRT - however, you'd have to see if you can fund a QPRT with a partial interest in a residence.