Sorry to hear of your loss.

There is not likely to be an excess accumulation penalty if the RMD does not come out this year, but it would require filing a 5329 on each return requesting the penalty be excused for reasonable cause. The IRS will accept this, certainly due to the death occurring late in the year.

Mechanics can come into play here. The RMD does not have to be taken equally by all beneficiaries or in proportion, as long as it is fulfilled in dollar amount. The RMD can also be taken either before separate accounts are established or afterward. But if the beneficiaries agree on unequal shares of the RMD, for example all going to one of them because that one needs the money, then the IRA custodian will have some accounting challenges to keep the respective shares equal.

If the full RMD can be removed prior to year end, there will be no need to file a 5329 requesting a penalty waiver, except possibly on the final return for your Dad noting that the RMD was fulfilled by the beneficiaries so the IRS knows what is occurring.

If your Dad had any non deductible contributions in the IRA, each beneficiary will inherit a share of the remaining basis. That would make the future beneficiary RMDs less than 100% taxable. Look for Form 8606 on his 2007 return to determine if there was any such basis.

Most importantly, as a non spouse beneficiary, none of you can roll over any distributions. If you want to change IRA custodians, it MUST be done by direct trustee transfer. Separate accounts need to be set up no later than 12/31/09 for each beneficiary to use their own remaining life expectancies.

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