I am working on a 1041 estate return for our family. The trust agreement states that all accrued, accumulated and undistributable income and assets goes to two children upon death, 50-50. After coming up with Net Income before DNI for the estate does that mean all of the income needs to be distributed? Or, could some income be left in the estate undistributed at around the $8,000 level to avoid any taxes on this amount? Under this approach, the DNI "to be distributed" would be reduced by $8,000 saving the beneficiaries and the estate taxes on that amount.
