Here is an easy table that Social Security uses to value life estates and remainder interests. https://secure.ssa.gov/POMS.NSF/lnx/0501140120
It is much easier to use than the IRS formula valuation system.
Letting him buy you out or you buying him out are probably your best options if you can come to a reasonable agreement.
Your alternative is if they do damage the place then you can sue him for "waste." A life estate holder has an obligation to keep the property up and not do anything to damage the value of the property for the remainder interest holder. His estate would also be liable for this damage after his death if he has assets to go after at his death.
With that said, litigation can be very expensive. You could possibly get your expenses paid if you win but could spend more than 10K before you get through a lawsuit for waste. That is why your settlement discussions are likely the best for everyone.
I cannot provide you with legal advise. I have provided you with information about the law related to your question. My answer, and any information that you find online, should not take the place of having a consultation with a lawyer in your area to advise you regarding your specific issues.
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