All praise is due to Allah, the Lord of The Worlds; and may His Peace and blessings be upon Prophet Mohammad, and upon all his family and companions.
Offering food to the family of the deceased is an act of Sunnah for it was reported that Abdullah Ibn Jaf`far (May Allah Be Pleased with him) narrated that when the news of Jaf`far`s death was delivered, the Prophet (PBUH) said: "Make food for the family of Jaf`far as they are now occupied with the death of their son." [Narrated by Al-imam Ahmad and others].The family of the deceased is: his household. Al-Imam Al-Menawi said: "It is recommendable that the deceased`s neighbors and next of kin make food for his household, and should insist on that." [Faid Al-Qadeer vol.1/pp.534].
It is worth noting that offering food to the household of the deceased was originally permitted as a kind of condoling since they are experiencing a tragic event, and this is what the Prophet (PBUH) referred to in the above Hadeeth. However, at present, people tend to make big-expensive banquets on behalf of the deceased as a kind of showing off, which contradicts the objective of the Prophet`s Sunnah in this regard. Al-Imam Al-Dahlawi reported that Al-Imam Al-Saioti said in the book [Injah Al-Hajah]: "Making food for the deceased`s household is a Sunnah, but nowadays it has become a way for showing off since food is made to a huge number of people and could be even made by the household of the deceased, which turns this act into a kind of an ugly innovation."
This kind of behavior led different clans to establish cooperative funds (Takaful) which offer food for the family of the deceased, and it is considered one of the good deeds Inshallah. But, spending should be steered in the right direction through making food for the household of the deceased only and not the whole clan or members participating in the fund.
We recommend doing so by unanimous agreement of the whole clan members in order to make sure that funds are not wasted on extravagant, needless banquets that contradict with Sunnah. And Allah Knows Best