If a Herald's family is wiped out, the only difference between that and the same thing happening to a regular player is that the Herald is put back into the same position rather than taking a random new one. They still lose everything except their ancestral fiefs, just as a non-Herald would if wiped out; and as far as game play is concerned, they are actually worse off than a regular player, as their positions are small ones and they have no chance to, say, come back as a rich Italian or a big overlord.