Since they are giving cash and not the house itself, it would not be a gift with reservation of benefit. However, they could be liable to a pre-owned asset charge and be subject to income tax on 'notional income'. This will be the case if they do not pay rent at full market value.
See here for info:
https://www.taxationweb.co.uk/tax-articles/general/pre-owned-assets-tax-a-practical-update.html
https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm44000
Or they can opt to treat it as a gift with reservation of benefit.
Unless the family have significant other assets there's unlikely to be a big IHT saving in any case as the property would be covered by nil rate band x2 and residence nil rate band x2 giving you £950,000 of allowances now and £1m from April next year.
On top of that if you or your sister move out you expose it to CGT and if either of you divorce it will be part of the marital assets and potentially result in a share passing to a spouse.
Unfortunately a lot of solicitors who deal mainly with conveyancing don't really understand the issues around the transfer of a family home and create issues for clients on a regular basis (I've advised 3 different clients on this issue this month!).