Your Kids Will Inherit the Duplex: What to Decide Now

Most owners of a duplex or a small rental have said some version of the same sentence: "It will go to the kids." It is a generous plan, and often a sound one. It is also unfinished. A building with tenants in it does not pause when the owner dies. Rent comes due, a furnace fails, a lease ends, and someone has to have the authority and the information to deal with it.

You do not have to solve everything this year. But a handful of decisions made now, while you can explain your reasons, will spare your children a lot of guessing later.

Decision one: do they actually want to be landlords?

Start with the conversation, not the paperwork. Inheriting a rental means inheriting a role. Ohio Revised Code 5321.01 defines a landlord as the owner of residential premises, so whoever ends up on the deed takes on the duties that come with it, from repairs to security deposits.

Ask each child directly. One may want the income and the work. One may want the income and none of the work. One may live three states away and want nothing to do with it. None of those answers is wrong, but you want to hear them from your children now rather than have them discover their positions in a lawyer's office.

Decision two: how the deed will pass

If the building goes through probate, the executor handles it during the estate, which we covered in what happens to a rental property in Ohio probate. Ohio also gives owners a simpler route.

Under Ohio Revised Code 5302.22, you can sign a transfer on death designation affidavit naming one or more beneficiaries, and record it with the county recorder. It has to be recorded before your death to work. Under Ohio Revised Code 5302.23, you can change or revoke it at any time without your beneficiaries' consent, and they have no interest in the property until you die. You can also name contingent beneficiaries in case one of your children dies before you.

After your death, the beneficiary records an affidavit of confirmation along with a certified copy of the death certificate, as Ohio Revised Code 5302.222 provides. In Tuscarawas County, recording runs $34 for the first two pages and $8 for each additional page, according to the county auditor's deed transfer instructions.

One thing the affidavit does not do is clean up debts. Section 5302.23 says the beneficiary takes the property subject to all encumbrances, and that no lienholder's rights are affected by the designation. A mortgage on the duplex stays on the duplex.

Decision three: how several children will share it

If you name more than one child and say nothing else, section 5302.23 has them take title in equal shares as tenants in common. You can instead specify unequal shares or have them take as survivorship tenants. Which one fits depends on your family.

Shared ownership is where good intentions most often run into trouble. Under Ohio Revised Code 5307.01, tenants in common can be compelled to partition, and under 5307.04 the court shall order partition when it finds the plaintiff has a legal right to part of the property. In plain terms, any one co-owner who wants out can ask a court to divide or sell the building, even if the others want to keep it.

That is why it helps to settle a few things in advance. Who manages day to day? How is the rent split after expenses? What happens if one child wants to sell and the others do not? Some families put those answers in an agreement or hold the property in an LLC with an operating agreement. Forming an Ohio LLC costs $99 to file with the Secretary of State, but the agreement behind it is the part that matters, and that is a job for an attorney.

Decision four: give it now, or leave it later?

Some owners consider deeding the duplex to the kids now to keep it out of probate. Look at the tax side first. Under IRS Publication 551, the basis of inherited property is generally its fair market value on the date of death. Property received as a gift generally keeps the giver's adjusted basis instead.

For a building bought decades ago and depreciated for years, that difference can be large. A gifted duplex brings your old, depreciated basis with it, while an inherited one generally starts fresh at its value on the date of death. Ohio itself no longer has an estate tax, which was repealed for deaths on or after January 1, 2013. This is exactly the kind of decision to make with your accountant, not around them.

If long-term care is a possibility, also ask an elder law attorney about Ohio's Medicaid estate recovery law. Ohio Revised Code 5162.21 reaches assets passed outside probate through survivorship, a living trust, or "other arrangement," so a plan that avoids probate does not automatically avoid recovery.

Decision five: what your kids will need to find

Whatever route you choose, your children will need the working records of the building. Put these in one place and tell someone where it is.

• Current leases and each tenant's contact information
• The security deposit ledger, since Ohio Revised Code 5321.16 requires an itemized return within thirty days after a tenancy ends, plus interest on larger deposits held six months or more
• Keys, alarm codes, and utility account numbers
• Insurance policy, property tax bills, and any mortgage statements
• Your list of trusted plumbers, electricians, and the person who plows the drive

None of this is legal or tax advice. It is a list of the questions worth bringing to your attorney and accountant while you are the one who can answer them.

What if the kids would rather not keep it?

Sometimes the honest family conversation ends with "we love you, and we do not want to be landlords." That is a perfectly good answer, and it is better to hear it now. Some owners then decide to sell during their lifetime and leave cash, which is far easier to divide than a building.

If that is where your family lands, RCB Rentals LLC buys occupied homes as they are, with tenants and leases in place, and the Beatty family has cared for rentals in Tuscarawas County for years. You can read more about who we are, or ask for a no-obligation cash offer so your family has a real number to weigh. No pressure either way.