The tax savings will be around $8,100 per year or $680 per month at a 20% tax bracket.

When I die, they can keep renting out the properties or move into the SFH, or take the step up basis and sell it with not as high of a capital gains tax hit (I hope they wouldn't choose the 3rd option).

I do have preferences ie close to beach/lake, no state tax (limited but if possible). 2.

@Loren SouersI'm going to lead with the suggestion that you consult a tax professional and an attorney.Generally speaking, you can put a rental property in a revocable living trust, which can help with estate planning and asset protection.

But you'd still haev the benefit of lots of costs spread across 7 or 15 years vs. 27.5 Work with a tax professinal becuase this is a tricky situation. 

hey @Matthew Toporowski, at the least I would check their financials/tax returns to see how profitable they are (which translates into how easy it will be to pay your rent).

That includes property insurance and property taxes.

This would lower your down payment requirements, lower your interest rate, lower your property taxes, and MAY make you exempt from state income tax.

From my basic understanding it would make sense to change it to a rental and then do the remodel so I can claim depreciation on my cost, is this correct or not? 

@Becky Hoffman If one member of the LLC does not care to have any claim to the property as you describe why can't the partner merely be removed from the LLC.