When Mike died in Breaking Bad, did the DEA confiscate his money, or did his granddaughter inherit it?
No. When money is found to have been gotten through illegal means it no longer belongs to the initial beneficiaries. This money (from what I understand) now belongs to the state.
From the latest episode (spoiler) (aired 11th of August 2013)
we see Jessie attempting to give half of his share of the $5mil (given to him by Walter/Heisenberg) to Mike's Granddaughter, knowing she now needs the money.
So I hope this answers your question!
I don't think we know at this point.
The lawyer was dropping off money for the guys in prison when caught, not Mike's money for his granddaughter, Kaylee. That safety deposit box was already filled, with a note for her.
If you want to speculate... you could suppose that the lawyer had the key to that deposit box as well on him and they did confiscate it. But you could also argue that since the deposit box was already filled Mike would have taken the key himself to be delivered to Kaylee at a later time.
Jesse attempting to give Kaylee half of the $5 million did not indicate to me that he knew anything about the money in the safe deposit box.
The government seized both the money Mike had deposited for his granddaughter by Gus Fring in an overseas account and the money left in the safe deposit box by the attorney. There's no indication that Mike had any other money stashed away as he had Walt bring him a "bug out bag" from it's hiding place at the airport so it seems that he left nothing to his grandchild.
On a side note, this seems to have been completely amateurish of Mike to have his funds seized. Had he used the money that Walt wrangled from his deal with Declan to purchase something like gold coins or collectibles, he could have easily concealed these from the feds and allowed them to be given to his granddaughter many years later following his death and after any statute of limitations had passed.