Ultimately, Grace and, it appears, the children, become convinced that they're actually dead and trapped in Purgatory, unable to leave the house. Grace walks off into a blizzard, determined to find a way out, but makes a big circle and ends up back in their front yard. Aidan tells her that they must already be dead because they can't die, and to prove his point, he hangs himself in the stairwell.
Then, of course, the other shoe drops. We see a slow zoom into the attic of a body harness Aidan used for his little death-defying trick, and a small boombox playing a recut version of one of the cult patriarch's repentance speeches the kids found online. When we cut back to their father, who's packing his things to return to the cabin and stumbles upon the children's dollhouse (underutilized, as in Hereditary), he sees that the children have used the house, which is, creepily, an exact replica of their mountain lodge, to act out exactly what they plan to do with Grace, down to a bloody "REPENT" written on one of the walls.
Grace has trapped the children in the attic, menacing them with the pistol Richard had shown her how to use in an earlier scene and telling them that repentance -- in this case, killing their already purgatoried souls -- is the only way out. The kids try to convince her that it was all just a trick, but she's much too far gone. At this moment, Richard arrives at the house and meets them on the stairwell. Trying to prove that they're all in Purgatory and can't die, Grace pulls the trigger on first herself and survives because there's no bullet in the chamber, but when she does the same to him she shoots him in front of his children.
The final scene is of the "family" sitting around the kitchen table as she sticks duct tape with the word "SIN" written on it over their mouths, reminiscent of a video taken after her suicide cult had all killed themselves. This is where it all ends, but, given how cruel it's been to its characters so far, it's safe to assume Grace must have killed them. It's bleakness merely for the sake of bleakness, and the reveal flops even harder if you know beforehand that Fiala and Franz have already made this movie. Their previous film, Goodnight Mommy, is also about (spoiler alert) two children stuck in a house in the snowy wilderness who torture a woman they believe is trying to replace their mother. Why this again? Are these directors just working out some intensely distrustful emotions they have about children? Look, kids are plenty scary, I won't argue against that, but with its final reveal, The Lodge ends up a disappointing muddle of clichés and twists that have already worked out much better in better movies. Just stay home and flip on The Thing instead.