Single Family Renovating too be used as a 2 unit with separate mother-in-law suite unit.

I am currently renting my aunt’s old house for her as a single family rental in AA county Maryland. She’s now in assisted living and won’t be moving back. I wanted to split the appx. 1/2 acre lot but after talking to ...

May end up in a law suit.

Reasons they don't buy today: still in forbearance, no down payment saved, move around alot, in a divorce, funds tied up in lawsuit.... 

As landlords, we can't utilize our energy worrying about what tenants think, whether or not they are having a hard time paying the rent, or whether or not they are physically ill or lose their job because we landlords have our own burdens to worry about e.g. major expenses, increases in insurance, property taxes, non-paying tenants, liable lawsuits and we have our own personal problems, illnesses and griefs to deal with.

It’s still not clear what kind of coverage would be there if tenant sue me for anything related with rental like - false advertising, mental trauma, moving cost, wrong ful eviction  etc.I want to protect against these kind of lawsuits and not getting clear information like what’s covered vs what’s not.

Maximized potential by creating an additional unit that was originally just a "mother-in-law suite" and properly separated units to function as two independent STRs.

A lot of landlords are advised to put their properties in the name of an LLC for asset protection.While this is basically true, the reality isn’t what most landlords think.If a legal issue occurs with your property resulting in a lawsuit, there’s a decent chance the plaintiff’s attorney will be successful in “piercing the corporate veil” of your LLC and being able to sue you directly.

If they prevail in the lawsuit everything they did will be vindicated. 

If that's not convincing enough, then remember that the best way to avoid liability (lawsuits) is to disclose, disclose, disclose - and do it in writing so you have a paper trail if a defect comes up later.