You really need an attorney or at least a qualified accountant who knows how to deal with inheritance tax returns. It appears that also an income tax return needs to be prepared for the lawsuit year. You could do it yourself, but you probably will run into issues that will cost more later to fix.
This is not legal advice nor intended to create an attorney-client relationship. The information provided here is informational in nature only. This attorney may not be licensed in the jurisdiction which you have a question about so the answer could be only general in nature. Visit Steve Zelinger's website: http://www.stevenzelinger.com/
Yes REV form 1500 is correct form. Because the proceed are entitled Pension funds they are still subject to PA Inheritancre tax. Depending on the amount and your financial ability there may be Pro Bono groups that can assist you