Legal Question in Wills and Trusts in California

The general rule is that the Life Estate holder is responsible for maintaining the property. This includes any mortgage, taxes, insurance and general upkeep. Your mother's trust may provide instructions that deviate from this general rule. If your step-father cannot maintain the property, then he is committing what is called waste and his life estate could be terminated and the remainder interest would be transferred to you now. If you cannot afford the property, then you could at least sell it, assuming there is equity in the property. The trustee must carry out his duties as trustee and cannot favor one beneficiary over another. That would be a breach of his fiduciary duties and possibly cause for removal.

I write just to clarify Mr. Feldman's correct answer. What he means by "the general rule," is that by law, without anything in the trust or testimentary documents, the owner of a life estate must maintain and pay for the expenses of the property, including taxes and debt service. So there does not need to be anything in the documents to make that true. There would have to be something in the documents if your mother wanted some different arrangement, but not if she wanted those rules of law to apply. By saying nothing different, your mother's intent is deemed to be that the law will be followed.

The issue that I see that no one addresses is who created the encumbrance?

Any interst in real property that is transferable may serve as security for a deed of trust. If the owner of the property who held title in fee simple executed the deed of trust, then arguably both the life tenant and the remainderman are responsible for the debt secured by the deed of trust. If the lender foreclosed, they would take title as it existed at the time the deed of trust was executed, meaning the entire fee simple.

On the other hand, if the life tenant created the encumbrance by executing a deed of trust, then only his life estate is encumbered. The life tenant is responsible for the payments of the debt, and upon his default, the lender would only be able to foreclose on the life estate.