Legal Definitions - distribution in kind

Distribution in Kind

A "distribution in kind" refers to the transfer of an asset or property directly to an individual or entity in its original, physical, or non-monetary form, rather than converting it into cash first and then distributing the money. Essentially, the recipient receives the actual item itself, not the monetary value it would generate if sold.

• Example 1: Estate Inheritance

  Imagine a will specifies that a deceased person's valuable art collection should be given directly to their niece, rather than being sold at auction and the niece receiving the cash proceeds. In this scenario, the art collection is a distribution in kind because the niece receives the physical artwork itself.

• Example 2: Business Partnership Dissolution

  Consider two partners dissolving their small manufacturing business. Instead of selling all the company's specialized machinery, tools, and remaining inventory to a third party and then splitting the cash, they agree that one partner will take the machinery and tools, while the other will take the inventory. This is a distribution in kind because the partners are directly receiving the physical business assets.

• Example 3: Divorce Settlement

  During a divorce proceeding, a couple owns a shared investment portfolio consisting of various stocks and bonds. Instead of liquidating the entire portfolio and dividing the cash, they agree that one spouse will receive specific shares of a particular company, and the other will receive a different set of bonds. This transfer of the actual securities is a distribution in kind.