A Distribution-In-Kind is made from an Estate when an heir or legatee chooses to take an Estate asset as part of their Residuary Distribution in lieu of cash. The most common example tends to be taking a vehicle in lieu of cash. For example, you are an heir or legatee to your mother’s Estate. She owns a late model vehicle that has been garage kept and has very low mileage (and you need a car!). You might request that the Personal Representative distribute the car to you in lieu of cash such that, in the end, everyone gets the financial value of the Estate they are entitled to. However, in your case, your financial value is a combination of cash and the vehicle. Note that the vehicle, or any other asset distributed-in-kind, will be distributed at the value it was Inventoried at. Thus, in our example, the vehicle would have been Inventoried at the Fair Market Value a Private Party would pay to purchase the vehicle based on a valuation report from a source such as NADA or Kelly Blue Book. Vehicles with an outstanding loan balance may complicate this.
Another common Distribution-In Kind occurs when an heir or legatee would like to purchase the Estate’s real property. This often becomes a bit more complex as the heir or legatee will need to buy out the other heirs and legatees at a Fair Market Value that everyone agrees to. Often this requires appraisals. The heir or legatee purchasing the property will generally apply their portion of their Residuary Distribution from the Estate and pay cash or finance the remainder. As this may at times cause family disagreements, we caution anyone seeking a Distribution-In-Kind to seek the approval of all heirs and legatees.