There are lots of different kinds of pensions; if it were a defined benefit plan it likely would have been lost with her. With a defined contribution plan the money goes to her beneficiaries. As it was not taxed until now, the Government takes its share and when you take the money out it is taxed. The issue is how long can you hold it in the pension plan untaxed?
I understand that there is legislation pending that could enable you to role over the pension into your own plan, untaxed, until you take it out starting not later than age 70.5.
This is intended as general information only, NOT legal advice. You are not my client and I have no obligation of any kind to you. To retain a lawyer I suggest you go to www.AttorneyPages.com.