For this distribution, the payer is not required to withhold taxes, but
must do so by default if you do not specify otherwise on the Form W-4P. If you plan to pass the income through to the estate beneficiaries as Distributable Net Income, I would request zero withholding since credit for the taxes withheld from this distribution cannot passed through to the estate beneficiaries on the Schedule K-1. If taxes are withheld under these circumstances, the estate would have to obtain a refund of the withholding and subsequently distribute the money to the estate beneficiaries, delaying this portion from reaching the beneficiaries. The beneficiaries would likely still need to make estimated tax payments to cover the total income passed through to the beneficiaries.
State tax withholding requirements may vary.
(Please do not consider this to be tax "advice" or a recommendation, consider it to be only the suggestion of an option. You should obtain advice from an estate attorney or a CPA familiar with estate income tax returns and estate distributions.)
