Is it incumbent upon the children to pay Zakat on money that their father saved to buy a house, but was unable to do so, knowing that the father passed away and did not pay Zakat for two years?

If you gifted money to your father, and he did not buy a house with it, and the money remained with him for two years, reaching the nisab (threshold for zakat) either by itself or by being combined with other money he owned, then he was obligated to pay zakat on this money. Since he passed away and did not pay the zakat, it is considered a debt upon him, and it must be paid for the two years before the inheritance is distributed.