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Afaik this is a relic from the cosmetics system, you might lose paid cosmetics (specifically skin transfers) otherwise, which should really not be the case.
In the current game, without leagues, dying in hardcore really isnt that punishing, but in leagues you don't rip to "league softcore" you go to "standard softcore". That's basically like never playing the character again.
Standard is where everything goes after a league/season is over.
HC is really just a 'status' tag, much as SSF doesn't really do much, other than not allow trading and show that the char has found everything they have.
Once you remove the HC flag from a char, then, it's up to the player to decide whether to keep it or not.