I deeded the house to my kids but kept living there — is it in my estate?

Almost certainly — an implied retained life estate under §2036(a)(1) pulls the full date-of-death value back in. Rent at FMV or move out.

Does §2036 expire after a few years?

No — there is no 3-year clock as in §2035. A retained interest inclusions the property whenever death occurs.

What is the “bona fide sale” exception?

Transfers for full and adequate consideration in money or money’s worth escape §2036 — the FLP planning hinge, and the IRS’s favorite attack point.

IRC §2036 · 26 U.S.C. §2036

IRC §2036: Transfers With Retained Life Estate

By Paul D. Diaz, EA, MBA · Updated September 20, 2026

IRC §2036 pulls transferred property back into the estate when the decedent kept possession, enjoyment, or the right to designate who enjoys it. Keep the strings, keep the estate tax.

What it governs

Retained possession or enjoyment — express or implied — triggers inclusion
Right to designate the persons who possess or enjoy, alone or with others
No time limit: unlike §2035, a retained interest inclusions lasts forever
The family-limited-partnership and personal-residence battles are fought here

In the GuideFull treatment in Chapter 15 of the Guide — THE TAX CUTTERY® Guide to Federal Income Taxation, Professional Edition (564 pages, 24 chapters).

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Questions this section answers

I deeded the house to my kids but kept living there — is it in my estate?: Almost certainly — an implied retained life estate under §2036(a)(1) pulls the full date-of-death value back in. Rent at FMV or move out.
Does §2036 expire after a few years?: No — there is no 3-year clock as in §2035. A retained interest inclusions the property whenever death occurs.
What is the “bona fide sale” exception?: Transfers for full and adequate consideration in money or money’s worth escape §2036 — the FLP planning hinge, and the IRS’s favorite attack point.

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