What is your advice to my friend whose irreligious grandfather's house is frequented by people seeking blessings, taking water from a tap next to the house, and placing money there? Should he destroy the tap, and is the money unlawful?

It is not permissible to seek blessings from the relics of anyone other than the prophets. There is no narration from the Companions that they sought blessings from Abu Bakr, or Umar, or anyone else. If it were good, they would have preceded us to it. The friend (who asked the question) should alert and warn people against this forbidden act of seeking blessings and get rid of this faucet. He has an example in Umar, may Allah be pleased with him, when he cut down the tree under which the Prophet, peace and blessings be upon him, was given allegiance, when it reached him that some people were praying there. As for the money he took, there is no harm in it, because it was given with the consent of its owners and has no specific owner, but it is not permissible to condone an evil act for the sake of money.