Praise be to Allah.
Reading Yasin for one who is dying
We have to make a distinction here between the two issues: reading Surat Yasin for one who is dying, and reading it for one who has died.
With regard to reading Surat Yasin for one who is dying, this practice has been reported from some of the Companions.
Imam Ahmad reported in his Musnad from Safwan: “My shaykhs told me that they were with Ghudayf ibn al-Harith al-Thumani when he was dying. He said: ‘Can any of you read Yasin ?’ So Salih ibn Shurayh al-Sakuni recited it, and when he reached the fortieth verse, Ghudayf passed away. My shaykhs used to say that when it is recited in the presence of one who is dying, it eases the pain of death.” That was the opinion of Safwan. ‘Isa ibn al-Mu’tamir read it for Ibn Mab’ad (when the latter was dying).” (Al-Musnad, 16355)
Al-Albani said in Irwa al-Ghalil, 3/152: “This is a sahih sanad going back to Ghudayf ibn al-Harith, may Allah be pleased with him. Its men are thiqat apart from ‘the shaykhs’ who are not named and are therefore unknown (majhul). But the fact that they are unknown is compensated for by their large number, especially since they are of the generation of the Tabi’in (Successors)…”
Shaykh Ibn ‘Uthaymin said in al-Sharh al-Mumti’ fi Ahkam al-Janaiz: “Surat Yasin may be recited over him (i.e., the one who is dying) for the one who thinks that the hadith is correct.” He explained that this is because this surah contains good news of Paradise, as in the ayah (interpretation of the meaning): “It was said: ‘Enter Paradise.’…” [Yasin 36:26], and because it makes the passage of the soul easier, and other reasons.
Reading Surat Yasin for the dead
As regards reading Surat Yasin for one who has died, there is no sahih hadith to indicate that this should be done. A hadith was narrated by Abu Dawud and others which says “Read Yasin over your dead”, but this hadith is not sahih because its isnad contains contradictions and narrators who are unknown (majhul). This was stated by al-‘Allamah al-Albani in Irwa al-Ghalil, hadith no. 688.
Reading Quran over the dead is considered to be a bid`ah (innovation), as he states at the end of his book Ahkam al-Janaiz.
Some people think that it should be read forty times over the deceased, and some of them may distribute copies of the Quran among the mourners who gather to offer condolences so that they may read, or organize gatherings in the mosque to read it for the soul of the deceased. All of this has no basis whatsoever (in the sunnah), and these are innovated deeds of bid`ah which we should avoid and warn others against. And Allah is the Source of strength.
And Allah knows best.