Our question is what is the best way for estate planning purposes regarding whose name we put on the deed and the mortgage.
The only person who can opine intelligently about this question is an estate planning attorney who knows all of the relevant facts about you and your in-laws.
They will not be putting thier home on the market untill after they move into the home near us.
I take it this means they have the cash to make the down payment without selling their current home.
who should hold the insurance policy? Us or them?
What insurance policy? Homeowner's insurance? Life insurance? Something else? And what does "hold the . . . policy" mean? If you're talking about homeowner's insurance, the owner(s) of record will need to be the named insured(s).