Even now dressed in passed on baby’s clothing (7)
I believe the answer is:
layette
'baby's clothing' is the definition.
(I've seen this before)
'even now dressed in passed on' is the wordplay.
'even now' becomes 'yet' (I've seen this before).
'dressed in' indicates putting letters inside.
'passed on' becomes 'late' (both can mean dead).
'yet' going inside 'late' is 'LAYETTE'.
(Other definitions for layette that I've seen before include "all ready for baby?" , "Baby's complete outfit" , "Kit for baby" , "Complete set of clothing for a baby" , "baby needs this" .)