You can indeed sell the kids a percentage of your home through a mechanism called TIC, an acronym for tenants in common or tenancy in common. TIC is also an umbrella term covering similar terms such as "shared ownership," "co-ownership" and "fractional ownership." Unlike the joint homeownership you share with your spouse where you possess an equal share of the property, a TIC structure allows you to sell any percentage to your daughter and spouse -- or anyone else, for that matter.
Particularly in pricey real estate markets such as yours, banks have fine-tuned their "fractional loan" lending programs over the past decade to accommodate the increasing number of TIC transactions and to decrease the risks faced by other co-owners (you in this case) at the same time. Each TIC loan involves a note signed solely by each of the tenants in common. Hence, if one owner defaults on his or her loan, the lender can only foreclose on that owner's share. Eventually, your daughter and her husband could buy out your share should you, for example, want to move elsewhere to retire. Or you could buy them out if the situation dictates.
As part of the process, be sure to construct a detailed agreement regarding living arrangements, home usage, tax responsibility, maintenance obligations and other contingencies, particularly reselling the share to an outsider (you probably don't want that for obvious reasons).
The share price should be based on the relative value of her assigned area, based on the property's overall square footage. While this sort of pact may sound a trifle impersonal for an all-in-the-family deal, it's nevertheless essential in avoiding potential pitfalls and strained relationships. You might assume that family co-owners create fewer problems in these deals, but the opposite is frequently true, say experts. Sometimes, personal relationships make it more challenging to resolve issues.
Hire a tax, estate or real estate attorney -- or a similarly qualified professional -- to handle the paperwork, particularly because your daughter will be an heir. It wouldn't be unreasonable to ask your daughter and husband to shoulder some of the legal costs, given your generous offer.
Good luck in your TIC partnership.