The best solution in these circumstances is to get the drafting of your parents' wills right.
By including appropriate trusts in the will your parents can:
(1) Keep the house available for the survivor of your parents while ensuring that the first to die makes the maximum use of his/her "nil rate band" (the amount up to the IHT threshold - Â£263,000 at present). This saves IHT of 40% of the nil rate band, so currently Â£105,200.
(2) Allow the survivor to make further lifetime transfers of part of the value of the house, without these being treated as gifts caught by the rules on reservation of benefit. If the survivor outlives the first to die by seven years or more this can keep the whole value of the assets owned by the first to die free of IHT.
One other essential step is for your parents to "sever" their joint ownership so that they become tenants in common and their respective half shares of the house pass under their wills, rather than automatically to the survivor.
Your parents need to find a solicitor who specialises in inheritance tax - not all know a great deal about it. The best place to start is a solicitor who is also a member of the society of trust and estate practitioners. If I can help please do get in touch.
Lester Aldridge Solicitors
Tel: + 44 (0) 23 8082 0442
Mob 07881 920742
Fax: + 44 (0) 23 8082 0441