They did, to an extent.
But first let's step back a little bit and talk about IQ heritability.
IQ is highly heritable, and that heritability is largely driven by genes (from 50% to more than 70% according to most estimates, some going as high as 90%).
However, there are a few things to take into account when you are talking about exceptionally intelligent people.
First, you have the fact that Einstein's children, obviously, also have a mother, and therefore inherited their IQs from her as well. Now,, Einstein's wife, was also pretty smart. In fact, she contributed to some of Einstein's work. But assuming she was less smart than Einstein, that would have been a factor driving the children's IQs down.
Secondly, there is the concept of regression towards the mean. What this tells us is that if both your parents are exceptional in a certain respect, you will probably be exceptional in that respect as well but not as much as your parents. So if both your parents are geniuses, you might be just as smart as them, you might be even smarter than them, but more likely you will be pretty smart, but not quite as smart as them.
Now on to Einstein's descendants.
The thing you have to understand is that the Einstein family has been plagued with health problems. You see, Einstein had three children:
Lieserl, who died in infancy (probably when she was one year old). Not much can be said about her intelligence obviously.
Eduard was a promising medical student, but then started developing schizophrenia. He was institutionalized for a large part of his life and the primitive treatment methods he was subjected to deeply affected his cognitive abilities.
Hans Albert Einstein
Then you have Hans Albert Einstein. Hans Albert was a pretty brilliant scientist. He was a professor of hydraulic engineering at UC Berkeley and the world's foremost expert on sediment transport. That might not sound as impressive as his father's achievements, but that still makes him a pretty smart person.
Hans Albert's children, again, had many of the health problems that characterized the first generation of Einstein descendants. You see, Hans Albert had four biological children, but only one of them, Bernhard Einstein, survived to adulthood.
Bernhard was a pretty smart guy. He became a physicist, worked in engineering for Texas Instruments and Litton Industries, and received half a dozen US patents in his life. That's pretty decent, but that's not quite as great an achievement as his grandfather's.
Bernhard had five children, but I was unable to find information on any of them. I assume they had lives similar to their father's: pretty successful by normal standards, pretty unsuccessful compared to their great-grandfather.
Here's the thing: I have the IQs of none of these people, not even Einstein's, and I don't want to be judging their lives.
However, at least with regards to their scientific achievements, you could say that this is a good example of regression to the mean: from the greatest physicist in the world to the foremost expert in a relatively restricted scientific field to a pretty good engineer. That's what the Einstein lineage looks like.