Your reference to seven years suggests that you think this is a good thing to do for inheritance tax. It isn't. The seven year period will not start running until you cease any benefit from the property, including living in it. While you receive any benefit it is called a reservation of benefit.
It is rarely a good idea to do inheritance tax planning with the family home because (a) it doesn't work and (b) it causes problems.
The two main problems you would have are:
- if your children sell the property (at your request or otherwise) they will have to pay capital gains tax on the gain in value - this is currently 28% and could (feasibly) increase as high as 40% in future.
- if you fell out with your children or they were divorced, their interest the property could be sold.
To illustrate this, when you sell MIL's house, the taxable gain will be the gain accruing since 1992, which is presumably substantial. If MIL had died owning the property, it would only be any gain accruing since 2020 when she died.
To answer your questions (assuming it was a simple bare trust rather than discretionary or MIL having a life interest)
- probably not - tax is usually based on beneficial ownership so you were already the owners. Any IHT would have been payable when MIL died on the basis it was still in her estate
- probably not - assuming you have lived in the house since you acquired it so can rely on PPR. As mentioned above, it would stay in your estate for IHT.
- it is mostly a formal distinction. Your children become the beneficial (effective) owners whether or not they become the legal owners. It would however save you having to register the trust for the HMRC trust register (the rules change March 2022)
Do not consider this without getting some proper advice as (to emphasise again) there is rarely any point to it.