Of course you don't have to pretend that someone is a saint when he clearly wasn't. That's not what the expression means. All it basically says is that you shouldn't say he was an asshole (or not out loud at least).
I can see the point. There might always be someone around who has good memories of a certain person and if you're going to call that person names like that they might get a little touchy and emotional leading to nasty situations. I don't know if you have any friends or relatives who have passed away, but how would you feel if you hear someone saying they were assholes and bitches and whatnot? I doubt you'll be glad to hear that. Furthermore, it's always a bit weak anyway to attack someone when he isn't around to defend him/herself.
You may still think he was an asshole, but it might be wise to keep that to yourself.