The separation type should be mentioned as a deceased employee. As far as my knowledge goes, you might additionally select it as retirement in ERP. Any direct payment should be held up, and you must process all payments as Final Settlement.
When an employee dies, the designated beneficiary is entitled to receive payment for any outstanding wages due to the employee and often for unused personal, annual, sick, excess sick, and donated leave. Refer to the appropriate collective bargaining agreement and Personnel Rules to determine the authority to pay off leave accounts.