Siblings sharing toys

Our girls are 5 and 1 and I have no idea what to do with their toys. Our 5 year old is my step daughter and an only child at her moms house, which shows when she comes back with us. She doesn’t share. Everything is hers. When she’s with us she’s always playing with the babies toys. And won’t share with her sister. We tell her if she wants to play with baby toys she has to share with her baby sister. She has tons of toys she doesn’t play with in her room. We keep the baby toys in the living room since she’s not old enough to play in her room unsupervised. But 5 doesn’t like playing in her room alone when we’re all in the living room.

I feel like we should move all the toys into the living room and make it a free for all. With the exception of small toys that aren’t baby safe, and a few special toys that 5 picked out and paid for with birthday money. But majority would be in living room? For both to play with as they please.

Or- should we just keep them all separate and baby plays with baby toys and kindergartener plays with kindergarten toys ?

I’m lost. Our current method of the living room is for sharing and playin in your room is for you special toys. I think all in one is best? Am I making sense?