Situation: Two adults, two children.  The two adults are parent and child (over 18), both are on the current lease.  They were inherited tenants, and have been EXCELLENT tenants almost always paying on time like clockwork and not having any issues.  

The child is moving out, and the parent was originally going to move.  We listed it - and now they want to stay.  Since winter is approaching we want to get them now on a 6 month lease to stay until spring.  

I want the lease to be in my format - so I don't want to just do a assignment or revision - I want just draft a new lease.  

Since the security deposit would be paid to both Parent and Child, and the parent is just staying - what kind of special language do I use to say that the security deposit is being transferred to new lease - but in addition when it is returned it will be made payable to "parent AND child" since they both submitted it?

Close out the account as if they moved, that lease is over, account closed. Make the new lease, show a new deposit. This can be done simply exchanging checks. Your deposits are escrowed funds, not yours to use or assign to one or another depositor. Keeps your books clean and compliant with escrow account laws. Good luck :)

I agree with @Bill Gulley .  Settle the security deposit in the customary way you would do it for any tenant that leaves. Then collect funds from whomever is going to be the replacement tenant. 

In this specific instance, you might want to get in writing instructions from the two people directing how you should pay out any amounts due back to them from the deposit. You might even want to see if the person staying will be assuming full responsibility for any of the damages rather than splitting that up - you might even find that all damages were caused by the departing person and they both agree that the full payment for damages should come from  that share. 

But make sure they both put into writing any instructions on how to handle it. 

Originally posted by @Steve Babiak :

I agree with @Bill Gulley.  Settle the security deposit in the customary way you would do it for any tenant that leaves. Then collect funds from whomever is going to be the replacement tenant. 

In this specific instance, you might want to get in writing instructions from the two people directing how you should pay out any amounts due back to them from the deposit. You might even want to see if the person staying will be assuming full responsibility for any of the damages rather than splitting that up - you might even find that all damages were caused by the departing person and they both agree that the full payment for damages should come from  that share. 

But make sure they both put into writing any instructions on how to handle it. 

 Absolutely, especially as to tagging someone for damages. :)

You've already got good advice here @John K. only thing I want to add is just another vote of confidence in what's already been stated. Follow the rules, keeps everyone out of trouble.