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Your parents could put the condo in a revocable living trust (or establish an irrevocable trust in their wills) now that would become irrevocable upon their deaths and they could designate your sister and her husband as successor trustees to manage the condo and collect income and upon their deaths the condo would be distributed to your children. The trust could also include provisions giving the trustees discretion to make distributions prior to their deaths or maintaining the assets until your children attain certain ages.
Will these options accomplish what you want to achieve?
Your parents may be able to create a life estate deed in their wills for your sister with your children as remainder beneficiaries. However, this does not eliminate the problem of your children possibly inheriting the property as minors. Another option is a life estate deed with you and your husband as remainder beneficiaries. Then you could leave the property to your children in your wills. However, this does not accomplish all of the objectives as a trust would. Your parents should consult with an attorney in CA that specializes in real estate in order to explore the different options available other than a trust.