My wife's aging parents want to add her and her sisters names to the title on their California FREE and CLEAR home. Their total estate would be less than 1 Million.

I had understood that it would be better to will the property, so as to avoid Capital Gains as the value of the property would be based at the time of death instead of the Original purchase date of the property which was over 15 years ago.

I think you're correct. When you receive a gift the tax basis for that gift is the same as the original owner's basis (there are complications if the value of the property has decreased, but that's probably not the case here), and the basis for property received from an estate is the value either on the date of death or 6 months later (if the alternate valuation date is used for estate tax purposes). So, if your wife is not planning on ever using the home as a primary residence, then if/when she and her sisters decide to sell the home the capital gains tax will be higher if the property had been gifted to them rather than passed through the parents' estate.

Have your in-laws explained why they think gifting the home now is a good idea? Are they thinking about having to some day move to an assisted living home? Or are they concerned about the probate process? One option could be to add the sisters' names to the title as payable on death - so that the property does not have to go through probate. Just a thought.