Nellie Geraghty, 79, suffered fatal head injuries as she desperately tried to cling onto the bag during the robbery in Oldham, Greater Manchester.
Police have launched a murder inquiry after she died in Royal Oldham Hospital at around midnight on Friday. Two youths, aged 14 and 17, have been arrested on suspicion of robbery.
Mrs Geraghty was found collapsed in an alleyway near her home in Shaw just before noon on Thursday.
Inside her handbag was a blue velvet bag she made herself containing the ashes of her husband, Frank, which she had carried with her since he died 17 years ago.
She was also carrying £200 in cash. The black handbag was missing at the scene but the strap was still in the pensioner's hand.
A statement issued by the victim's family said: "Nellie is much loved and will always be remembered by all her friends and family.
"We have lost the best mum in the world, the best sister, grandmother, auntie and friend a person could ever have.
"The world would be a better place if there were more people like you. Heaven will be blessed with your presence. Our sad loss is heaven's gain.
"We will miss you terribly, until we meet again, my mum, my sister my friend rest in peace."
Superintendent Catherine Hankinson, from Greater Manchester Police, told Sky News the investigating officers were keeping an open mind about the crime.
"There has been a level of violence used. Clearly Nellie has ended up on the floor and as a result of those injuries she's now sadly passed away," she said.
"Nellie's sister and children are absolutely devastated by what's happened, and the fact that their dad's ashes were also in that bag are now missing just makes this even more difficult to cope with."
Anyone with information about the incident near to the junction of Kershaw Street and Victoria Street should call police on 0161 8568951 or independent charity Crimestoppers, anonymously, on 0800 555111.
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