I am with your sister-in-law on this one. I know of NO edict that prohibits attending the funeral of someone who was disfellowshipped at the time of their death. The Kingdom Hall cannot be used, but an Elder or JW brother in good standing can agree to perform the service under some circumstances.
*** km 3/97 p. 7 Question Box ***
What if the deceased was disfellowshipped? The congregation would generally not be involved. The Kingdom Hall would not be used. If the person had been giving evidence of repentance and manifesting a desire to be reinstated, a brother’s conscience might allow him to give a Bible talk at the funeral home or graveside, to give a witness to unbelievers and to comfort the relatives. Before making this decision, however, it would be wise for the brother to consult with the body of elders and give consideration to what they may recommend. In situations where it would not be wise for that brother to be involved, it may be appropriate for a brother who is a member of the deceased person’s family to give a talk to console the relatives.
*** w81 9/15 p. 31 par. 26 If a Relative Is Disfellowshiped . . . ***
Should he die while disfellowshiped, arrangements for his funeral may be a problem. His Christian relatives may like to have had a talk at the Kingdom Hall, if that is the local custom. But that would not be fitting for a person expelled from the congregation. If he had been giving evidence of repentance and wanting God’s forgiveness, such as by ceasing to practice sin and by attending Christian meetings, some brother’s conscience might allow him to give a Bible talk at the funeral home or grave site. Such Biblical comments about the condition of the dead provide a witness to unbelievers or comfort to the relatives. However, if the disfellowshiped person had still been advocating false teachings or ungodly conduct, even such a talk would not be appropriate.—2 John 9-11.
*** w77 6/1 pp. 347-348 Mourning and Funerals—For Whom? ***
FUNERALS OF DISFELLOWSHIPED PERSONS?
However, suppose the deceased is a disfellowshiped person, someone who has been expelled from the Christian congregation for one reason or another. In “Questions from Readers” (The Watchtower, 1961, p. 544) the position was taken that a funeral for a disfellowshiped person was improper. The comment was made: “We never want to give the impression to outsiders that a disfellowshiped person was acceptable in the congregation when in truth and in fact he was not acceptable but had been disfellowshiped from it.” Are there no exceptions, in arranging a funeral for a disfellowshiped person?
Before answering that question it would be well briefly to review the matter of disfellowshiping. That it has a Scriptural basis can be seen from First Corinthians chapter 5, in which the apostle Paul commands the disfellowshiping of an immoral man. However, it was not until 1952 that Jehovah’s people of modern times acted on the growing urgency along this line. With strong zeal for righteousness and a hatred for what is wicked, they set guidelines for those taking the lead so as to keep congregations spiritually, doctrinally and morally clean.
Through the years Jehovah’s people have come to see the matter of disfellowshiping ever more clearly. Not only were details spelled out, but more and more it was seen that wisdom and love, as well as justice, have come into play. They saw the need of showing mercy to truly repentant erring ones, and of considering extenuating circumstances and any evidence of sincere sorrow. In quite recent years it was also pointed out that there is a difference between the way Christians should conduct themselves toward a notorious sinner or an aggressive apostate and toward one who is viewed as “a man of the nations”—to whom the common courtesy of a greeting may be extended.—Matt. 18:17; 2 John 9, 10.
It would seem that this distinction could even be observed in connection with the funeral of a disfellowshiped person. A Christian congregation would not want its good name besmirched by having it associated with any to whom 2 John 9, 10 applied, even in their death. But suppose a disfellowshiped person had been giving some evidence of genuine repentance and had been coming to the meetings and manifesting a desire to be reinstated in the congregation. Then, if the elders felt that it would not disturb the peace and harmony of the congregation nor bring reproach upon God’s people, there would be no objection to an elder’s giving a talk. How are they to know whether Jehovah has already forgiven him or not, since there is some evidence of repentance? Properly, the elders may have been waiting, wanting to make sure that his seeming repentance was sincere. Obviously, each case being different, it would need to be judged on its own merits. Of course, if a funeral talk is given, care would need to be taken not to dwell on personal matters nor to make any positive statements about whether he will be resurrected. But a fine Scriptural presentation and witness could certainly be given.
Moreover, we should not overlook two of the cardinal reasons for disfellowshiping a wrongdoer. One is to jolt him to his senses if possible. The other is to protect the congregation from his bad influence. Neither of these would apply now, since the disfellowshiped person is deceased. Even where a disfellowshiped person has continued as a mere “man of the nations,” so to speak, a Scriptural funeral talk can serve more than one good purpose, even as previously noted: It can provide comfort for the bereaved and a witness to outsiders. The very fact that a fine witness is given can be a comfort and consolation to the bereaved ones regardless of the circumstances.
Hope this helps.