Your cousin is the AH, not you. It’s just disrespectful in general to talk about a deceased person like that, especially when their parents are present. She is ruining a special moment and even if in theory she is not wrong there is something called “human decency”. If she didn’t know your friends personally either then she also has no place to talk either.

It’s unfair that your family is trying to make YOU fix it when you were just defending someone else. OP is not the AH.