While I tend to agree with you that a life estate should give a stepped up basis, there has been significant disagreement on that issue...on THIS forum.
Therefore I do tend to suggest trusts over life estates, and as you stated they are generally a better option for other reasons as well.
A life estate is a good option for a situation that is a second marriage, and the homeowner wants his/her spouse (non-owner) to be able to reside in the home for their lifetime, but wants his/her children to inherit.
Otherwise, a trust is usually better

