Mrs Nicholson and her husband Keith, from Castleford, West Yorkshire, took just three years to spend their prize money - equivalent to £3.5m today.
Son Howard said she had died following a "long fight against dementia" after developing the condition in 2009.
He requested donations to Dementia UK in her memory.
"After suffering with dementia for five years, she died on 11 April 2015 at Pinderfields Hospital with her sons at her side," he added.
"Viv was a one-off in all ways - a loving and loved mother, a glamorous great-grandmother and a friend to many."
Mrs Nicholson was a 25-year-old liquorice factory worker when she and her husband, a miner, won their fortune.
They made a number of extravagant purchases, including cars, jewellery and a ranch-style home.
But after Mr Nicholson's death in a car crash in 1965, his wife was landed with a huge tax bill and later declared bankrupt.
Afterwards, she struggled with alcohol and depression.
Mrs Nicholson later moved to Malta but was deported following a fight with a policeman.
She married three more times. One subsequent husband was killed in a car crash and another died from an overdose.
Speaking to the BBC in 2011, she said she had "no regrets" about her "spend, spend, spend" philosophy.
A West End musical celebrating Mrs Nicholson's life - named in honour of her trademark catchphrase - premiered in 1999.
Viv Nicholson, who became famous overnight when she said she would "spend, spend, spend" a £152,000 Pools win in 1961, has died aged 79.