@Scott G1 wrote:
The only issue is can I make this clear enough to the IRS that these are life insurance beneficiaries via the 1041 form and the issued K-1 forms. If I can, they should be tax exempt.
@dmertz is correct on this issue.
If you're only distributing life insurance proceeds, then you're essentially distributing corpus (nontaxable proceeds from a life insurance policy). Those proceeds are not included in gross income, regardless.
See https://www.law.cornell.edu/uscode/text/26/101
There should be no need to issue K-1s to report the distributions.
