talk to a tax accountant and your lawyer.
I am not confident you can do what you are proposing. The tax rules may require the reporting of the income via a K-1 (I am not 100% positive). Somehow you have to report to the IRS that the distribution occured; just sending them cash doesn't do it. The IRS is going to expect the beneficiares to pay tax on the cash received, unless there is supporting evidence (those K-1s) what the cash really was.
the trust will get taxed at 20% capital gains rate beginning at $13,000 of income; the 3.8% NIIT tax kicks in as well.
The beneficiares will pay no more than 15% in capital gains tax, as long as their income is below $400,000 and can avoid the 3.8% NIIT tax if their income is below $200,000 or $250,000
This is what @fanfare was referring to that the tax rates for the Estate are burdensome compared to distributing the income and then the beneficiaries pay the tax out of the cash they received.
Check with your lawyer if you are fulfilling your fiduciary responsibility by having the trust distribute in the manner you suggest; I wonder if a beneficiary could challenge you as some of the money they were due under the will paid for taxes in a manner that wasn't in the benficiary's best interest (which as the executor you have an obligation to act in their best interests)
bottom line: discuss with an expert (tax accountant and lawyer) - and NOT an anonymous community board before you act! if taht much money is at stake, a few dollars paid to these experts is well worth the cost for family harmony.
