I know this seems like it should be an obvious answer but it doesn't clearly state which documents are transferred or which ones are deleted so I want to be sure before I do this.

Hi Kirsten thanks for posting! Our apologies for the confusion. The 32 documents wouldn't be deleted if you choose not to transfer ownership. Only the ones they created are in question. We recommend always transferring ownership of users you are deleting or delicensing. You can then decide afterwards if you'd like to keep the doc/s or not. Hope this helps!