I am not licensed to practice law in North Carolina so the following should not be taken as legal advice, but simply as information based on general principles of law which is intended to educate. If you need legal advice, please consult a lawyer who holds North Carolina licensure.
Each state has what's called an "intestate succession" statute that says who gets what if someone dies without a will. I have posted the link to the NC intestate succession statute below.
The proceeds of the life insurance policy are not part of the estate. They go to the beneficiary which in this case is the child. The bereaved fiancee should consult a lawyer in this circumstance to explain her and her child's rights, and the lawyer consulted should be one who specializes in estates.
It is not clear from the information whether there is a wrongful death claim, or just an insurance question. If a person is killed by the negligence of another person, the estate of the deceased person has a wrongful death claim that must be filed within 2 years of the date of death. The heirs of the deceased person recovers the proceeds from the wrongful death case. Good question, but need more information.
An administration needs to be opened through the NC Courts in the county where your fiance' died. Your son and any other children your fiance' had will likely share his estate. However, since your son is two years old, the money will be held by the court until he is 18. Your son is entitled to social security benefits. I would suggest that you see an attorney.