My father's trust/estate was closed in 2008 and recently we found an insurance policy that named the estate as the beneficiary. There is interest on the policy and I have gone through probate so it can be distributed. My questions are as follows:
I am ready to distribute the proceeds. Can I distribute the non-taxable portion so the beneficiaries don't have to pay taxes and leave the taxable amount (interest) in the estate so taxes are paid from the estate? This allows me to also deduct the cost of lawyers and probate which offsets the taxable income (is this correct?) Or can I pay the taxes from the estate and submit a 1041 now (In August) and then distribute to the beneficiaries after the irs form is submitted in August? Or do I have to wait until next year to distribute after taxes are paid? Or I distribute now and each person pays taxes based on their situation - so cannot use the lawyer's expenses?
Thanks for any advice.
