Lyric discussion by rendalf 

Cover art for Sleepless lyrics by Decemberists, The

I imagine this to be a son watching his cruel father pass away. He's asking him if the pain he inflicted on him was his only way to express love. Sleepless meaning the drifting in and out nearing death and the water closing in being the final curtain.

Hand it over meaning he's inheriting all the father's stuff and thank you for doing your time raising him.

Possibly his father's disposition was because of the grandfather's own cruel streak. "And all the while your mother slept beside him"

I may be reaching a bit but it seems to fit.