Check out the bottom of the second page of form 5329.  As long as that gets filed it is pretty much an automatic exception.  As a side note, there were no RMDs for 2020.

The 5329 needs to be filed for every year that the distribution is not take. The penalty for each distribution not taken is charged for every year that the distribution is not made, e.g. miss 2017 for $1,000, miss 2018 for $1,200, miss 2019 for $1,600 then even though there no distribution for 2020, there is still a penalty on $3,800 for the three prior years that are still not distributed.

As @IRonMaN fill out the bottom for an exception. 

The problem is that wife lacks capacity and has no power of attorney.  Schwab won't automatically take RMD for her.  Is there anyway to avoid penalty under these circumstances? I don't see how Form 5329 addresses this issue.

Check out the form instructions and the software.  To the best of my knowledge, it has worked for roughly 99.97866799871779999% of taxpayers to date.

And in the meantime, have them hire an attorney to work out the issues with Schwab.

They may want to consider Married Filing Separately until this is all resolved. Since Wife is not competent and there is no representative, my guess is that no return can be filed yet. Signature for wife on a MFJ return is also a probable issue.

@Lawnet Look at the bottom of 5329 in ProSeries, (not the form itself) in the software between line 53, and 54 there is a "waiver of tax smart worksheet" If you fill that out, as @IRonMaN said it will work for 99.97866799871779999% of all taxpayers for avoiding any penalty.