You should refer to the notes here
, paragraphs 12.1 to 12.11 inclusive.
It seems to me that you are the life tenant of an interest in possession trust, the asset
being a property which will pass to the ultimate beneficiaries when you die. The tax
rules for trusts changed in 2006 for the worse as far as settlors and beneficiaries are concerned but as you were the wife of the deceased, if this is an IIP trust, exit and 10 year Inheritance Tax charges will not apply Instead, when you die the value of the property will be included in your estate for Inheritance Tax purposes. This is no different to what would have happened had the property been left to you absolutely and you owned it for the rest of your life.
If you renounce your life interest in favour of the ultimate beneficiaries, the children, such that the trust is wound up and the house is passed to the beneficiaries or sold and the cash passed to them, there should be no immediate IHT charge as you will be treated as having made a potentially exempt transfer to them which will fall out of your estate so long as you live for at least seven years after making the gift. See page 39 here
. A reducing term life assurance policy might be considered to cover the potential IHT liability should you die within seven years of making the gift.
If the house is sold within the trust, there should be no Capital Gains Tax to pay as the gain will be covered by main residence relief due to your occupation of it as the life tenant of the trust.
You should have the trust document reviewed by a solicitor with tax knowledge or a trust tax expert to ensure that the trust is an IIP trust and that on the termination of your interest, it comes to an end as opposed to the ultimate beneficiaries becoming life tenants (very doubtful) in which case the tax implications could be very different
I hope this helps but let me know if you have any further questions.