Yes, this is an unusual situation where what is ultimately a total distribution spans two calendar years.
The IRS instructions for box 9a say that the percentage is to be entered if the distribution is a total distribution made to more than one person. In this case, the distribution to you was not a total distribution and the payer should have left box 9a blank or it did constitute a total distribution and the Total Distribution box should have been marked by the payer.
I would probably just mark the Total Distribution box on TurboTax's 1099-R form. The marking of the Total Distribution box really only has significance in the context of a lump-sum distribution from a qualified plan that qualifies for special tax treatment on Form 4972, for which this distribution would not qualify.
The other option would be to leave box 9a blank. The percentage in box 9a has no bearing on the tax treatment on your tax return.
"I suspect this is required because there's a possibility the remainder could pass to me if my sister was unable to eventually receive it."
That's not a consideration for how Form 1099-R is prepared. You would directly inherit your sister's portion only if your sister disclaimed within 9 months.
