This includes hiring an inspector to check for structural problems, arranging for a pest inspection, and getting a professional appraisal to ensure the property's value matches the bank's asking price.

I have an LLC structure, but I own a rental held in my personal name. 

I think the one DETACHED 2 bed 2 bath ADU that is being built off a converted garage + extension is perfectly OK and there is no question there.I think the grey area is around how you go about turning a 5 bed 3 bath existing living unit that is currently the downstairs of the main structure, into 2 2 bed 2 bath units, one of which is classified as a main unit and the other classified as a ATTACHED ADU.I have heard there are some rules disallowing converting existing living space into ADUs that may make this difficult.

Awesome to hear how you have your structure set up @Shannon Mogilinski, it's quite obvious that you all are dialed in on your proccess - I love it!

There's lots of tax planning on this and I would suggest to take a professional opinion on how to structure a transaction in a way that you can make it into capital gain tax or reduce self-employment tax.

The structure of the transaction is much more important than is generally recognized.  

As Greg noted, there is a lot that I would want to be crystal clear on with how it is structured, how you can remove yourself, if needed, how you can change management or sell.

They said it is in a trust and structured so that it can't be sold until the owner's death? 

Perhaps you could form an LLC later on down the line to clean up the structure after some time.That way you'll be able to do clean 1031's with your new partner from property 2 --> property 3 ect.....

Great question, and I commend you for thinking ahead when it comes to estate planning and ensuring your investments are structured properly!