I Inherited a Rental Property in Vancouver, WA. Now What?

Someone died, and now you own a house with a stranger living in it. Most guides to this situation are written for heirs of an empty house, which is a completely different problem. A rental comes with a tenant, a lease, a deposit sitting in someone's account, and a body of Washington law that applies to you from the moment of death, whether or not anyone has told you.

The good news is genuinely good, and better than most heirs expect. The trap is that the thing you most likely want to do, get the tenant out so you can sell, is the one thing Washington may flatly forbid. Start here.

First, the Good News: Three Taxes You Probably Do Not Owe

1. Washington has no inheritance tax

The Department of Revenue answers this in two sentences worth quoting exactly: "Washington does not have an inheritance tax. Washington does have an estate tax." And: "If you are a person living in Washington who inherits property or money, you do not owe Washington taxes on your inheritance."

The estate tax is a separate thing, paid by the estate, and only when the gross estate exceeds the exclusion. That threshold moved recently, so the date of death matters:

• Deaths January 1 to June 30, 2026: exclusion $3,076,000, top rate 35 percent.
• Deaths on or after July 1, 2026: exclusion $3,000,000, and the top rate returns to 20 percent.

That July 2026 rollback is recent enough that a lot of what you will read elsewhere still describes the 35 percent regime as current. Washington also has no portability between spouses, unlike the federal system, though a separate Washington QTIP election exists. The federal exclusion for 2026 deaths is $15,000,000, so federal estate tax is not the issue for most families. Returns are due nine months from death, with a six-month extension available to file but not to pay.

2. The depreciation your parent claimed does not follow you

This is the most valuable paragraph on this page. Anyone who has owned a rental for decades has taken a mountain of depreciation, and in a normal sale that comes back as recapture taxed at ordinary income rates. Heirs brace for it. It is not there.

IRC Section 1250(d)(2) is one line: "Except as provided in section 691 ... subsection (a) shall not apply to a transfer at death." IRS Publication 544 puts it in plain English, and gives your exact fact pattern as its example: "You owned depreciable property that, upon your death, was inherited by your child. No ordinary income from depreciation is reportable on the transfer, even though the value used for estate tax purposes is more than the adjusted basis of the property to you when you died."

Now the contrast that makes it land. If your parent had gifted you the rental while alive, this would have gone the other way. Pub. 544's gift rule requires the donee to account for the depreciation the donor deducted. Dying with the rental wipes the recapture. Giving it away during life does not. Families who "simplify things" by deeding the rental to the kids early frequently destroy a benefit worth more than the hassle they avoided.

3. Your basis resets to today's value

IRC Section 1014(a) gives inherited property a basis equal to "the fair market value of the property at the date of the decedent's death." Sell near that value and the taxable gain is close to nothing. Hold it and rent it, and you depreciate from the new, higher number rather than your parent's exhausted 1980s basis. Your holding period is automatically long-term no matter how briefly you owned it, and the IRS tells you to write "INHERITED" in column (b) of Form 8949.

Washington is a community property state, which adds a bonus for a surviving spouse: under IRC 1014(b)(6), both halves of true community property get the step-up, not just the deceased spouse's half. Separate property gets only the half. This distinction is worth a conversation with a CPA rather than an assumption.

Get a date-of-death appraisal. The step-up is only as defensible as your documentation of the value on that date, and a retroactive appraisal gets harder every month you wait.

And if you sell: no Washington capital gains tax

Washington's capital gains excise tax simply does not reach real estate. RCW 82.87.050(1) exempts "All real estate transferred by deed, real estate contract, judgment, or other lawful instruments that transfer title to real property." DOR's FAQ answers it with one word: "No. Washington's capital gains tax does not apply to the sale or exchange of real estate." One caution: the exemption reaches real estate owned directly. If the rental sits inside layered entities, the analysis changes.

Real estate excise tax does not apply either. Under WAC 458-61A-202, "Transfers of real property through a devise by will or inheritance are not subject to the real estate excise tax." You still file an affidavit claiming the exemption, and the documentation depends on your route: probated will, a signed lack of probate affidavit where there was no probate, or a death certificate for a transfer on death deed.

Now the Hard Part: The Tenant Comes With the House

Here is where heirs get hurt.

Title passes instantly. RCW 11.04.250 provides that title "shall vest in the heirs or devisees instantly upon the death of such decedent," subject to the decedent's debts. And because Washington defines "landlord" as the owner of the dwelling unit, becoming the owner makes you the landlord, with every duty in the Residential Landlord-Tenant Act attached. There is no grace period and no opt-out.

You might assume the lease is someone else's deal that you never signed. It is not. You also cannot fall back on the recording act: RCW 65.08.070 protects only a purchaser "in good faith and for a valuable consideration." An heir paid nothing, so an unrecorded lease is not an escape hatch.

You cannot evict to sell or move in mid-lease. Full stop.

Washington is a just-cause state, and "I inherited it and I want it back" is not among the sixteen causes in RCW 59.18.650. Worse for the heir in a hurry, subsection (5) closes the obvious workarounds:

"Nothing in subsection (2)(d), (e), or (f) of this section permits a landlord to end a tenancy for a specified period before the completion of the term unless the landlord and the tenant mutually consent, in writing, to ending the tenancy early and the tenant is afforded at least 60 days to vacate."

Those three subsections are exactly the ones you were reaching for: owner or family occupancy, electing to sell, and demolition or substantial rehab. If eight months remain on a fixed-term lease, none of them are available to you, and no amount of notice fixes it. Your options are to wait out the term or to negotiate a written mutual termination giving the tenant at least 60 days. Cash for keys is a legitimate strategy here, and often cheaper than the alternative.

Once the term ends, the tenancy becomes month-to-month by operation of the statute, and the doors open a little:

• Electing to sell: 90 days' written notice, and only for a single-family residence. Not a duplex, not an apartment unit. You must genuinely try to sell within 30 days after the tenant leaves, or a rebuttable presumption of bad faith attaches. Re-renting it instead triggers that presumption.
• Owner or immediate family occupancy: 90 days' written notice, in good faith, as a principal residence, and only if no substantially equivalent unit is vacant. Fail to actually live there for 60 consecutive days within the following 90 and, again, presumed bad faith.

The penalty for getting this wrong is not theoretical. A tenant who prevails on wrongful eviction is entitled to "the greater of their economic and noneconomic damages or three times the monthly rent," plus attorneys' fees and costs. If your plan is to sell, read selling a rental property with tenants in Washington before you list anything.

You inherit the rent-increase clock too

House Bill 1217 caps annual increases at 7 percent plus CPI, or 10 percent, whichever is less. The Washington Department of Commerce has set the 2026 maximum at 9.683 percent. Three things heirs get wrong:

• There is no new-owner exemption. RCW 59.18.710's exemption list is closed, and inheritance, probate, and sale appear nowhere on it. The cap attaches to the tenancy. If the decedent raised rent four months ago, you wait eight.
• No increase at all during the first 12 months of the tenancy. Note that it runs from when the tenancy began, not from when you inherited.
• A rented-out single-family home is fully covered. The single-family exemption applies only to an owner-occupied residence, and it requires that the owner "continues the occupancy." If your parent lived there and rented rooms, that exemption died with them.

Rent increases need 90 days' written notice using the statutory form. And if you are thinking of dropping the property into an LLC during administration, know that an entity with a corporate member loses several of these exemptions outright.

The Security Deposit Is a Landmine

Find it before the estate distributes a dollar. RCW 59.18.270 requires deposits to sit in a trust account, and when "the status of landlord is transferred to another," the funds must move to the successor's trust account and the successor must promptly notify the tenant of the new depository.

The sentence that should worry you is this one: "The tenant's claim to any moneys paid under this section shall be prior to that of any creditor of the landlord, including a trustee in bankruptcy or receiver, even if such moneys are commingled." In an estate with debts, the tenant's deposit claim outranks the decedent's creditors. If the money is not in an identifiable trust account, fund it from the estate rather than hoping.

Two more traps:

• The deadline is 30 days, not 21. RCW 59.18.280 gives you 30 days after the tenancy ends to deliver a full, specific written statement and any refund. Older guidance saying 21 days is out of date.
• No move-in checklist means no deposit. Under RCW 59.18.260, no deposit may be collected without a written rental agreement and a written checklist given at the start of the tenancy, and a landlord who collected one anyway "is liable to the tenant for the amount of the deposit." Informal family rentals with a handshake and no paperwork are extremely common, and they mean the deposit is effectively the tenant's. Withholding it invites attorneys' fees.

Tell the Tenant Who You Are (This Is a Legal Duty)

RCW 59.18.060(16) requires the landlord to designate the name and address of the person who is the landlord, and "the tenant shall be notified immediately of any changes in writing." A change of owner is a change of landlord, so this is triggered the moment title vests.

The next clause matters enormously for out-of-state heirs: "If the person designated in this section does not reside in the state where the premises are located, there shall also be designated a person who resides in the county who is authorized to act as an agent for the purposes of service of notices and process, and if no designation is made ... then the person to whom rental payments are to be made shall be considered such agent."

If you live in California and inherited a Vancouver rental, Washington requires you to designate someone in Clark County to accept notices and service of process. Skip it, and whoever collects the rent becomes your agent by default. This is a statutory requirement, not a sales pitch, and it is one reason many out-of-state heirs hire local. Our out-of-state landlord guide covers the rest.

Cannot find the lease? Ask the tenant. They are entitled to a copy and usually have one.

Probate: Who Is Actually the Landlord Right Now?

This is the question that paralyzes families, and Washington answers it more cleanly than you would expect. It is a switch, not a muddle:

• No personal representative appointed: the heirs hold title and possession and may sue for the rents "whether letters testamentary or of administration be granted or not." The heirs are the landlord.
• A personal representative has been appointed and qualified: the PR has "a right to the immediate possession of all the real as well as personal estate" and "may receive the rents and profits of the real estate until the estate shall be settled," and must "keep in tenantable repair" the buildings. RCW 11.04.250 carves the PR out of its own grant to heirs, "excepting only the personal representative when appointed." The PR is the landlord, signs the leases, collects the rent, and brings any eviction.

An heir who redirects the tenant's rent to their own account mid-administration is taking estate property. Sort out who is in charge before the first of the month.

Do you need probate at all? Not necessarily. Title vests instantly with no court order. But read RCW 11.04.250's proviso: "no person shall be deemed a devisee until the will has been probated." So an intestate heir may avoid it while a beneficiary under a will usually cannot. Nonprobate routes exist too: a community property agreement (RCW 26.16.120), a funded revocable trust, or a transfer on death deed under RCW 64.80, which is valid only if it was recorded before death with the Clark County Auditor. A TODD found in a drawer afterward is void, and there is no cure.

The small estate affidavit will not save you. This is worth stating clearly, because most consumer content implies otherwise. RCW 11.62's affidavit reaches only personal property, so it can never transfer the house. And because its $100,000 ceiling counts "the decedent's entire estate subject to probate," a Vancouver rental usually blows the limit, which means you often cannot use the affidavit for the bank account either.

If you do probate, ask about nonintervention powers under RCW 11.68. For a solvent estate the court grants them routinely, and they let the PR lease, sell, and settle "without an order of the court and without notice to, direction from, approval by, confirmation by, or intervention of any court." This is why Washington probate is unusually cheap and fast. Clark County's probate filing fee is $290. Publishing the creditor notice starts a four-month claim window; skip publication, or fail to notify a creditor you should have known about, and the exposure runs 24 months from the date of death. That is the real argument against distributing early.

Three Local Traps Nobody Warns Heirs About

The senior exemption clawback

If your parent was over 61 and on a property tax exemption or deferral, this is the one that bites at closing. The exemption is personal and requires the home be the claimant's principal residence, so an heir renting the house out can never qualify. Recipients "must inform the county assessor of any change in status," and taxes granted on erroneous information get collected with penalties "for a period of not to exceed five years." An estate quietly collecting a dead parent's exemption is accruing a bill.

The deferral program is worse, because it is a lien. Deferred amounts become payable on sale, on ceasing to reside there, or on the death of the claimant. An heir who rents the property out is not qualified to assume it, so the deferred balance plus interest comes due. Heirs get blindsided by this at the closing table.

Good news on the ordinary bill, though: Washington has no California-style reassessment on a change of ownership, because there is nothing to reset. Clark County already revalues annually at 100 percent of market value. Inheriting does not spike your property taxes.

The Vancouver registration deadline already passed

Vancouver adopted a rental registration program (VMC 5.08) requiring all owners of residential rentals inside city limits to register annually. Registration opened January 1, 2026 and was free for 90 days. That window closed on March 31, 2026, so the $30 per unit annual fee now applies. Health and safety inspections are slated to begin in mid-2027. The ordinance speaks in terms of updating registration after a sale closes, which is ambiguous as applied to an inheritance, so register promptly rather than litigating the wording. Also see our note on rental licensing requirements.

The insurance gap while the house sits empty

Coverage does not vanish at death, but it narrows. Standard homeowner and dwelling forms insure "the legal representative of the deceased," meaning the PR, not the heirs generally. Two practical consequences:

• A homeowner's policy is the wrong policy for a rental. If your parent lived there and you intend to rent it, the HO form no longer fits and needs to become a landlord or dwelling policy. Talk to an insurance agent in week one.
• The 60-day vacancy trap. Standard forms exclude vandalism and malicious mischief once a dwelling has been vacant more than 60 consecutive days. A rental that empties out during probate loses that coverage on day 61, which is exactly when nobody is watching the house.

Because carriers use their own forms and editions, treat this as "call your agent and ask about death and vacancy," not as a guarantee about your specific policy.

One More for the CPA: The Suspended Losses

If the decedent had years of suspended passive losses on the rental, they do not come to you. Under IRC 469(g)(2), those losses are deductible on the decedent's final Form 1040 only to the extent they exceed the step-up in basis, and the rest is permanently lost. A large step-up therefore destroys the loss carryforward. This is a real, time-limited decision that has to happen before the final return is filed, so it belongs in your first conversation with the estate's accountant, not your fifth.

Your First 30 Days

• Get a date-of-death appraisal. Everything downstream depends on that number.
• Establish who the landlord is right now: PR or heirs. Then notify the tenant in writing, per RCW 59.18.060(16), and designate a Clark County agent if you live out of state.
• Locate the lease, the deposit trust account, the move-in checklist, and the rent-increase history. That last one is the HB 1217 clock you just inherited.
• Call the insurance agent about the death condition and the vacancy clause.
• Check for a senior exemption or deferral with the Clark County Assessor before anything closes.
• Register with the City of Vancouver if the property is inside city limits.
• Talk to a CPA about the final return and the suspended losses while it still matters.
• Then decide. With the recapture wiped, the basis stepped up, and no Washington capital gains tax on the sale, selling has rarely been cheaper. With a tenant already paying and a fresh depreciation schedule on a higher basis, holding has rarely been more attractive. Our rent vs. sell guide works through the math, and remember: the lease may make that decision for you for a while.

Frequently Asked Questions

Do I owe Washington inheritance tax on a rental I inherited?

No. The Washington Department of Revenue states it plainly: "Washington does not have an inheritance tax," and "If you are a person living in Washington who inherits property or money, you do not owe Washington taxes on your inheritance." Washington does have an estate tax, but that is owed by the estate, not by you, and only if the gross estate exceeds the exclusion. For deaths on or after July 1, 2026 the exclusion is $3,000,000.

Do I have to pay the depreciation my parent claimed on the rental?

Generally no, and this is the single most valuable fact for an heir. IRC Section 1250(d)(2) provides that the depreciation recapture rule "shall not apply to a transfer at death." IRS Publication 544 gives the example directly: property inherited by a child produces "no ordinary income from depreciation ... reportable on the transfer," even where the estate tax value exceeds the decedent's adjusted basis. The contrast matters: if the same property had been gifted during life, the donee would inherit the depreciation history.

Will I owe Washington capital gains tax if I sell the inherited rental?

No. Washington's capital gains excise tax does not apply to real estate. RCW 82.87.050(1) exempts "All real estate transferred by deed, real estate contract, judgment, or other lawful instruments that transfer title to real property." The Department of Revenue's FAQ answers the question with a flat "No. Washington's capital gains tax does not apply to the sale or exchange of real estate." Real estate excise tax also does not apply to an inheritance, though an affidavit claiming the exemption is still filed.

Can I evict the tenant so I can sell or move into the house I inherited?

Not during a fixed-term lease. RCW 59.18.650(5) states that nothing in the sale, owner-occupancy, or demolition provisions "permits a landlord to end a tenancy for a specified period before the completion of the term unless the landlord and the tenant mutually consent, in writing, to ending the tenancy early and the tenant is afforded at least 60 days to vacate." No notice period cures this. Once the term ends the tenancy becomes month-to-month, and selling a single-family residence or moving in each require 90 days' written notice plus good faith.

Can I raise the rent on a rental I just inherited?

Only within the cap, and inheriting does not reset the clock. House Bill 1217 limits increases to 7 percent plus CPI or 10 percent, whichever is less. For 2026 the Washington Department of Commerce has set the maximum at 9.683 percent. No increase is allowed during the first 12 months of the tenancy, and the exemption list in RCW 59.18.710 contains no exemption for inheritance or new ownership. You inherit the tenancy's timeline, so if the previous owner raised rent four months ago, you wait eight.

Do I need probate to deal with an inherited rental in Washington?

Not always. Under RCW 11.04.250 title vests in heirs or devisees instantly at death with no court order needed, but the same section provides that no one is a devisee until the will has been probated. So an intestate heir may not need probate while a beneficiary under a will typically does. Washington's small estate affidavit under RCW 11.62 does not help here: it reaches only personal property, and real estate still counts toward its $100,000 ceiling, so a Vancouver rental usually disqualifies the estate from using it.

This article is general information for Washington rental owners, not legal, tax, or insurance advice. Estate, probate, and tax outcomes turn on facts specific to your family, and insurance terms vary by carrier and policy form. Confirm current requirements with the statute, your CPA, your insurance agent, or a qualified Washington attorney before acting.

Written by Avenir Gedarevich, Washington State Designated Broker (License #25011405) at VPMG Property Management in Vancouver, WA.