Is my understanding of inheritance tax correct?

[OobieDoo]

DF (divorced, single) owns a house worth around £400k and has savings of around £80k. His will states that ownership of the house will pass to his three children when he dies.

My understanding is that, as things stand, we would have no inheritance tax to pay (£325k threshold plus £175k residential nil rate band).

However, if we were to sell the house (we all have PoA) and set the money aside to pay for future care home fees, the threshold would drop back down to £325k. So if he were to pass away quite soon after we sold the house, we would have to pay inheritance tax.

Have I got that right?

Basically, but read Point 13 of this: www.odysseywealth.co.uk/blog/inheritance-tax-%E2%80%93-main-rules-around-residence-nil-rate-band

The link provided by Level75 sets things out clearly. In your example, the estate would not be liable for IHT. If the house is sold, as long as the money is retained in your father's name, the exemption would apply. It doesn't matter that you have POA as the proceeds of sale would still be in your father's name. However, if the house/proceeds were gifted to the children before death, the residential nil rate band would not apply - see example 3 in the link.

The gov.uk website explains how you can still use the tax relief www.gov.uk/guidance/how-downsizing-selling-or-gifting-a-home-affects-the-additional-inheritance-tax-threshold

POA ceases at the point where someone dies, so it's irrelevant unless you plan to sell the property before he dies.
After his death, the executor(s) make all the decisions.