How to answer "may we contact this employer" when previous supervisor died?

I'm in a field that has been really impacted by government funding cuts in the US, so while I am employed right now I'm really trying to keep my options open. My supervisor of a previous role that is relevant to this field passed away two years ago (and I actually found out about it through someone at my current job). How should I answer "may we contact this supervisor" questions on applications? I would just say "yes" but because I'm still in the same region and field, I don't know if it would come across as insensitive if a hiring manager who knows that this woman passed away saw that. I also feel like it just inherently looks bad to say "no" especially when there is no space to explain. Has anyone else been in a similar situation?

Author: crochetblankets