My parents both died in 2008 and as the personal representative for my last surviving parent I filed their 2008 taxes and handled the estate. For a variety of reasons, the estate assets were not completely dispersed to the heirs until six months into 2009. Among these assets were savings which I divided among the heirs and closed my parents accounts with the bank. Their bank sent me an end of the year statement for these closed accounts showing interest income in my parents' names.

What is the best way to report and pay taxes on this interest income?

The options I can think of are:
1. File 2009 taxes in my parents' names.
2. The heirs report and pay taxes on their share of the interest earned and received from my parents' estate.