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Thanks for your question
Your understanding of Inheritance tax is correct.
The only capital gain consideration that might arise, is the small profit made, between the value of the bungalow at the time of it being gifted, and its sale, which if sold straight away will be less (I imagine) then £10,600 x amount of those who inherit. (But this when the will dictates that the bungalow be gifted to the beneficiaries)
However, if the bungalow is being sold as part of the winding up of the estate (so the will dictates that the bungalow be sold, and the proceeds divided up) then there is no capital gain position to arise at all.
So in essence you do not suffer Inheritance tax AND capital gains - which I agree would be grossly unfair!
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