1. Under normal trust rules, if it is a Simple Trust, all income is required to be distributed to the beneficiaries. So they get a K-1 whether they actually receive any money or not. But, K-1s are generally not issued to tax-exempt beneficiaries.

Somewhere there is a Rev Proc, Ruling, or something similar that says the tax exempt entity has a choice. They can report in accordance with the K-1 or they can report when and what they receive. I think I'd wait til they get money and record as a bequest. If you report dividends per the K-1 the PF will have to pay tax on it.

EDIT: Your facts don't indicate bequest. I'm not following "client had a foundation established as a result of a trust in 2024 " and " the foundation is a 30% beneficiary of the trust. "

Seems circular.