"Does it mean that a 1099R is not created by Schwab who is the custodian?"
Correct. A Form 1099-R is only generated when there is a distribution. A distribution from this inherited IRA is not permitted to be rolled over, so if there is a distribution there is no permissible way to get the finds back into any inherited IRA. The movement of the funds from the original inherited IRA to another inherited IRA can only be done by trustee-to-trustee transfer which is not reportable, not by distribution and rollover.
