Can my mother gift the proceeds of sale to her children and live rent-free?

She will sell the family home which, she owns and presently occupies on her own.

My question is - can my Mother give away the proceeds of the sale to her 3 children and then live rent free n the retirement property which would be purchased and owned by 1 or more of her children. She has other assets in excess of the IHT threshold and has sufficient income to live on.

Your mother can certainly do so, the only question is what would be the taxation consequences?

The gift to the 3 children would be a potentially exempt transfer (PET) as far as Inheritance Tax is concerned. Since the mother has given the sale proceeds to the child who then goes and purchases property that the mother lives in, it would probably fall into the Pre Owned Asset regime, by virtue of Finance Act 2004 Sch 15 para 3.

The family should consider putting the property into trust - which has certain taxation advantages in this scenario. However professional advice is essential, to do this properly.