What would you do? (in-laws trying to support w/home purchase)

[Gracie Brown]

This is hopefully not as complicated as it might sound, but was wondering if any of the great minds on this forum have thoughts on best strategy for current situation.

My husband's parents are fortunate enough to own two properties:

House #1: A bungalow a few blocks from the beach in Venice Beach, CA - purchased for basically nothing in the 80s, own outright, probably worth about $1.2 million (guessing).

House #2: A 3bed 2 bath amazing view house with guest house in Topanga, CA - purchased for basically nothing in the 80s, has a 350k mortgage on it, probably worth about $2 million.

(both have extremely low tax basis)

My husband parents are also incredible generous, and were looking into way to help us and his sister purchase properties, without having to wait for the trust to be divided upon their death (knock on wood, not for a long while!).

The first idea was to 1031 the Venice house, giving each child enough to pay ~$500k or so down on a house.

Pros: higher payout

Cons: they have an existing tenant whom they are collecting $4k/mo from that they would lose, each sibling is looking for completely different things, so the timeline of the 1031 is scary in this real estate market, the house would be out of the trust.

The second idea was to take a loan on one (or both?) properties, giving each child just enough for a down payment, essentially (a few hundred grand).

Pros: both houses left in trust, quicker (?), simpler (?)

Cons: less $$, the loans on the properties would increase, would have to pay the loan (likely with the rental income from property #1)

Is there a better option that we just don't know about? I have been on this forum for a minute, but in practice, I don't know what the best way to go about this is. I thought this would be a great place to get any creative ideas that may be out there that we are unaware of. Is there a different way to use the equity in each home without overcomplicating?