Maybe? If would depend upon whether the retiree had used all of that amount as an offset to income in the past. What year was the retirement? How much of the benefit was shown as taxable in prior years? Was the 3 year rule used? Was the Simplified Method used? If partially taxable, then the remainder could be used in the year of death, but you should have an accounting of how much was used in prior years. 

https://www.rrb.gov/Benefits/TXB-85/SectionD can give a brief explanation of the complication.