Thank you for both your comments, to expant a little further. When the divorce was granted a few months ago a court order was put in place to settle the financial affairs. Basically the ex-husband gets to keep his pension, savings and get 23% of the profit from the sale of the house.
Therefore, in order to have the house remain in the sould name of the MIL, we shall have to pay off the remaining mortgage (Â£14K), then taking into account costs, pay the ex-hubby the Â£34K he want to walk away without having to sell the house.
We have a legal agmt now drawn up as a deed that he shall not contest the court order and that that has now been set aside.
Ref the cash gift, without the wealthy friend, we could not afford to do this, but are aware of the Â£3K limit on gifts... or we have to declare it to the IR, how can we get around this.
To us a non-wealthy people it seems unfair that if you have earned money, paid tax on it, that you cannot just give it away. One idea that has been proposed is to have a loan / mortgage style agmt drawn up so that the IR can see a return on the gift, then when wealthy friend passes away to have the amount bequeathed to MIL - what do you think???