Lets say the house was bought for £70k 20 years ago, and is valued at 650k after all the work having been done on it.
If this child inherits the house they wouldn't get get any money.
The child wants to keep the house and isn't bothered about getting the £260k tax free, as they just want to keep their family home, they don't happen to have "10 to 20 grand knocking about" (I don't really understand the implication that a lot of people who are 18-21 have this lying about). They can't get a mortgage for the house (40% of 650k - 390k is 156k), so have to sell it. But I'm sure they'd be really happy having no mortgage, if they'd just lost both their parents and their house. Or maybe not.