This tax withholding is not permitted to be passed through on Schedules K-1 to estate beneficiaries. The estate will need to receive the tax refund and then distribute the funds to the beneficiaries.
Because credit for such tax withholding is not permitted to be passed through to the beneficiaries, it's usually a mistake to have taxes withheld from a retirement distribution paid to an estate or trust unless the estate or trust will have a tax liability. Beneficiaries must instead be informed of the amount of taxable income they will be receiving so that they can make estimated tax payments if needed to avoid a tax underpayment penalty.
(The only tax withholding permitted to be passed through to beneficiaries is "backup" withholding, which is withholding demanded by the IRS or because the payee refused to provide a Taxpayer Identification Number.)
