The interest deduction would be taken by whoever repays the loan for a reverse mortgage. The deduction is limited to interest paid on no more than $100,000 of loan principal.
Fortunately, Treasury Regulation 1.691(b)-1 does allow a decedent’s prospective deductible items that hadn’t been paid at death to be deducted subsequently when paid by beneficiaries. However, in many cases, the beneficiaries don’t have enough income either, especially when the estate inherits the house to liquidate but doesn’t inherit pre-tax retirement accounts that might have created taxable income (as the retirement accounts typically go directly to beneficiaries by beneficiary designation).
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