Business & farm

Since the estate needs to name the beneficiaries and the amount distributed, that is the best method. The k-1 forms are reported on their personal tax returns. 

You are filing form 1041 for an estate. About Form 1041, U.S. Income Tax Return for Estates and Trusts.

The estate form will reduce taxable income by the distribution. If they are receiving the full distribution, there is no taxable income to the estate.