Watson informed the PGA Tour of his decision on Wednesday and his place in the tournament has been taken by Kevin Kisner.
His manager Jens Beck said Watson???s friend died unexpectedly on Tuesday night and that he had chosen to attend the funeral and pay his respects.
The world No 2 also made an early exit from the tournament last year after shooting a first round 83, citing problems with his allergies.
Watson will next month bid to defend his Masters title and claim his third title at Augusta.
Kisner, who does not have a top-50 finish in seven tournaments in 2015, will tee off in a group with Adam Scott and Brooks Koepka for the first two rounds.