Thank you for your question
My name is Clare
I shall do my best to help you but I need some further informtaion first
Have they made a financial contribution to your home?
So they are essentially paying off your mortgage is that correct?
When you say "Inheritance Gift allowance" what exactly are you referring to?
Which part of the UK are you in?
What is the Total value of your in law's assets?
Because there is no "Inheritance gift allowance" at all
The figure you are referring to tis the nil rate Inheritance Tax band - and if their Estate is worth more than that then Inheritance is payable - and the Estate would still include the money given to your wife as it is a "gift with reservation of benefit" - as in they will be living in your property.
This is NOT necessarily a way of avoiding the money being counted as part of the Estate in the long term.
It has the potential to be so - but only if they do not live with you full time and there is no actual requirement on you to give them a home.
Essentially then the reassurance they are looking for is what will ensure that the arrangement - which frankly has little chance of succeeding at best - fails completely.
However if you do still intend to go ahead then a simple agreement confirming that you will gove at least a year's notice if you intend to sell the property is the best that is achievable
Please ask if you need further details