It does not need to be reported unless there is an estate tax return (Form 1041) being prepared for 2016. If there is, you would include it so it can be distributed to the beneficiaries appropriately. Also, I am assuming you mean that the $1,600 state refund will be paid in 2016. If there will be no estate tax return, then it does not need to be reported anywhere.
If there is a state tax refund that would have had to be included as "taxable income" on the decedent's tax return, then it should be included on the estate tax return if received after the date of death. So, assuming the person itemized deductions on Schedule A on the 2015 tax return, that refund would be taxable income on the 2016 estate tax return. If the person who passed did not itemize deductions on Schedule A, then it does not need to be included.
