Ali reported: We saw the Prophet, peace and blessings be upon him, stand for funerals and so we stood up. The Prophet would sit and so we sat.
Source: Ṣaḥīḥ Muslim 962
Grade: Sahih (authentic) according to Muslim
Al-Nawawi said, “The preferred opinion of Al-Mutawalli among our scholars is that standing for a funeral is recommended. This preference is command by way of encouragement, yet sitting is clearly permissible.”
Source: Sharḥ al-Nawawī ‘alá Ṣaḥīḥ Muslim 958
عَنْ عَلِيٍّ قَالَ رَأَيْنَا رَسُولَ اللَّهِ صَلَّى اللَّهُ عَلَيْهِ وَسَلَّمَ قَامَ فَقُمْنَا وَقَعَدَ فَقَعَدْنَا يَعْنِي فِي الْجَنَازَةِ
962 صحيح مسلم كتاب الجنائز باب نسخ القيام للجنازة
قال النووي وَاخْتَارَ الْمُتَوَلِّي مِنْ أَصْحَابِنَا أَنَّهُ مُسْتَحَبٌّ وَهَذَا هُوَ الْمُخْتَارُ فَيَكُونُ الْأَمْرُ بِهِ لِلنَّدْبِ وَالْقُعُودُ بَيَانًا لِلْجَوَازِ
958 شرح النووي على مسلم