A family member passed away recently - what should I do with their passport?

You can return their passport for cancellation with a copy of their death certificate to:

Customer Care,
Passport Office,
Freepost PO Box 9718,
Balbriggan,
County Dublin.

Or

Passport Officer
Embassy of Ireland
2234 Massachusetts Ave NW
Washington D.C. 20008

Or you can also send it to your local consulate of Ireland.