Q: User is deceased. How is icloud data deleted?

Sorry for your loss.

I would think her account would just go dormant. You may want to call Apple Support for guidance. They do have guidelines for deleting Apple IDs, but they would be best to walk you through those steps.

My condolences.

You can simply leave the iCloud account inactive, or if you insist, contact Apple Support to deactivate the account.

You may be interested in these steps if you can do them and haven't already:

What to do before selling or giving away your iPhone, iPad, or iPod touch - Apple Support