It's a rough sell. It's like pitching your girlfriend on switching to an open relationship...they don't normally see the upside for them.
The best possible situation is that THEY bring it up. Make it clear you're leaving, make it clear you're going to still have time to work on their projects, and let them come to you with the idea of freelancing for them. You'll be in a much better bargaining position. And don't forget to ask for more money if you're switching to 1099 contracting (you're gonna get hit with self employment taxes, etc).
The best possible situation is that THEY bring it up. Make it clear you're leaving, make it clear you're going to still have time to work on their projects, and let them come to you with the idea of freelancing for them. You'll be in a much better bargaining position. And don't forget to ask for more money if you're switching to 1099 contracting (you're gonna get hit with self employment taxes, etc).