The argument passed to useState is the initial state much like setting state in constructor for a class component and isn't used to update the state on re-render

If you want to update state on prop change, make use of useEffect hook

function Avatar(props) {
  const [user, setUser] = React.useState({...props.user});

  React.useEffect(() => {
      setUser(props.user);
  }, [props.user])

  return user.avatar ? 
         (<img src={user.avatar}/>)
        : (<p>Loading...</p>);
}

Working demo

Functional components where we use useState to set initial values to our variable, if we pass initial value through props, it will always set same initial value until you don't make use of useEffect hook,

for example your case this will do your job

 React.useEffect(() => {
      setUser(props.user);
  }, [props.user])

The function passed to useEffect will run after the render is committed to the screen.

By default, effects run after every completed render, but you can choose to fire them only when certain values have changed.

React.useEffect(FunctionYouWantToRunAfterEveryRender)

if you pass only one argument to useEffect it will run this method after every render you can decide when to fire this FunctionYouWantToRunAfterEveryRender by passing second argument to useEffect

React.useEffect(FunctionYouWantToRunAfterEveryRender, [props.user])

as you notice i am passing [props.user] now useEffect will only fire this FunctionYouWantToRunAfterEveryRender function when props.user is changed

i hope this helps your understanding let me know if any improvements are required thanks

you can create your own custom simple hooks for this. The hooks changed default value when it changed.

https://gist.github.com/mahmut-gundogdu/193ad830be31807ee4e232a05aeec1d8

    import {useEffect, useState} from 'react';

    export function useStateWithDep(defaultValue: any) {
      const [value, setValue] = useState(defaultValue);
    
      useEffect(() => {
        setValue(defaultValue);
      }, [defaultValue]);
      return [value, setValue];
    }

#Example

const [user, setUser] = useStateWithDep(props.user);