Rent or Sell Condo to MIL

[Casey Cu]

Situation - We own condo (we paid 50k cash 2 years ago and have rented)

MIL is moving into the condo.
Mother in Law has about 60k in cash from sale of her house and 30k 401k, and she gets 2k per month SS.

Her health is realtively poor.
We are open to helping her financially some, but also want to protect her as she is not finacially super wise (She was recently ready to give a hospital a large amount of money because they said the insurance hadn't paid yet)
My wife is her only heir.

Option # 1 - Rent to her.. fair market is about 600 month.
Pros - Simpler, no Title Insurance, She has plenty of cash left to live on,

Option # 2 - Sell to her for about 65k.
Pros - Step up in basis when she passes. If she went to nursing home soon, she wouldn't have to spend all of her money before Medicaid kicked in.
Don't have to worry about her being conned out of money or wasting it. (although I now realize Medicaid might take the house after her death.. I guess that makes this not so great)

Option # 3 - Joint Tenanncy or Sell her half or other idea.
Pros... ?