If they (both) die within 7 years of the gift then the retained £2m will be subject to IHT as part of their actual estate and the £500,000 given away will be subject to tax as a chargeable transfer (failed PET). Obviously the NRB will apply to some of the gift and tapering could apply to the excess gift over NRB. Whether or not there is a GROB is irrelevant, other than for taper, if they die within 7 years.
s.102B(4) will prevent a GROB but it does not save the donor from a failed PET.
Obviously if only one dies within 7 years leaving their estate to the survivor, the retained part will be exempt.
I think your sums are right but I can't see how a life interest trust would help you here from a tax perspective. Leaving £1m to an IPDI for widow(er) would carry the same IHT exemption as an outright legacy to that widow(er) but appointing away during widow(er)'s lifetime would be the same an outright gift by widow(er) and carry the same GROB problems if the home.
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