Apparantly, it's up to the deceased person's next of kin to inform the Passport Office about a death. If they don't, the passport Office have no way of finding out - therefore, your passport remains valid and, unless you are one of those on a passport office 'watch list', no-one would be looking out for you leaving the country - I only repeat what I read this morning in the Telegraph, so don't all jump on me at once if it's not true!
It seems like another one of those 'non-joined up government department' thangs.