How do i explain to my son why he can't see certain family members anymore?

I'm married and have three kids. The oldest is 5. The younger two are 2 and 1. When my son was born my older sister had a child the same year a few months apart, another boy. Now my son and this boy grew up together. They literally saw each other everyday and treated each other like brothers. They would get together either at my place or my parent's place or my sister's place.My older sister has always been a bully and we never really had a good relationship. She was verbally abuse to me growing up and would physically hurt me, throw things at me, threaten me etc. She just never plain liked me. But as she got older she mellowed out and seemed to like the idea that we had kids together so she decided as adults that we'd be friends. She even for the first time in ever, when i was in my 20's begin chatting with me on my phone, adding me to social media etc. I thought she finally matured and wanted to make peace in her life.As the years wore on, motherhood seemed to have worn her out and she began exhibiting the same toxic behavior from when she was younger that i thought was abusive. She believes in spanking and yelling at her child at the top of her lungs. Sometimes if her son made a simple mistake of spilling his drink was enough for her to march up to him and slap his arm and scream at his face and call him stupid. My parents would watch but not do anything (they've never had the cojones to say anything to her, even when she was abusive towards me). I would get upset and tell her that she's out of line and hug her son and tell him its ok and that it was an accident. The worst part was that my son would be right there watching this and i could tell by the look in his face that he knew it wasn't right the way his "brother" was being treated. Me and her would take the kids out on outings, to the zoo, parks and every time, without fail either the day or the kids would wear her out and she'd start lashing out verbally, things like "Hayden, shut up already! No one wants to hear you sing that damn song!!" if her son was singing in the car. It would break my heart because he was always so happy from having a good time and his mom would just shut him down. She's not always like this. She has a really sweet side which id see from time to time where she loves that child and will hug him and play with him. Make him meals, read to him etc. She doesn't neglect him in any way. He has all the toys and food he could want. But i think she just has anger issues which my parents never helped her through as a kid and she still has them.I had enough of her sh*t a few months back because she thought it was ok for her to try her crap on MY son. We were in a park and my son was "hunting for squirrels". He wandered off (he usually doesnt) she went up to him and slapped him in the face and began screaming at him over it. I grabbed my son told her not so nice words and marched out of the park with my kids in tow. She later told my parents that i was raising a brat who got away with everything. She said that "family should be allowed to discipline not just mom and dad" She's insane. She thinks a brat is a happy kid and a well behaved kid is a defeated sad looking kid which is what shes creating with her son.Her husband is no better either. He's the more passive of the two, never seen him lay a hand on their kid but he's absolutely useless. He barely does anything with him, no bonding at all from what i can tell. Always acts like hes tired and leaves the parenting to my sister. He agrees with her parenting methods and i've even caught him once or twice making comments about my son to her. Things like "that kid needs to change his attitude" or "this kid needs to be put in place" and for what? Because my son was running around laughing and being loud and you know....being a damn kid!! And he'd sometimes get too rowdy and have trouble calming down after playing which is totally within normal child development. Her husband once or twice also tried poking fun at my son's weight which i shut him down quick. My son is tall for his age and as such weighs more than their son who is a little string bean. My son's pediatrician told me my son is perfectly healthy and within normal weight range.Sorry i feel like im rambling. Well, since the day of the park where she dared lay a hand on my son i havent let him hang out with her or my nephew. I told her over the phone that what she did was not ok. She never apologized and said that i was causing the family to "be divided" and causing drama and that we can hang out again once i admit i was wrong. She also blamed my son for complaining about her and that he needed to apologize to her for being bad and causing her to discipline him. My son is NOT ever going to do that so we are at this point in time not speaking to each other and unfortunately the cousins are have not seen each other for months. My son asks about his cousin and why he can't see him and it breaks my heart. The other day my son broke down crying saying he misses him so much and that he wanted to give him a letter. It was a letter saying that he will always love him. He also tried sneaking off following my mom when he heard she was passing by my sister's house. I try to distract him as much as i can, taking him to play dates, going on outings a lot. But its hard to get him to forget his cousin. Me and my husband think its just not ok to have such toxic people in our lives anymore who think it's ok to disrespect and bully other people. We have also started to limit contact with my parents as well because we don't like how they tend to confuse things around and talk about my sister like she's the virign mary around my son. That and my mom for a while wouldn't stop showing my son pictures of his cousin. "Oh look he's getting big like you? He says he likes pokemon now" Like wtf?! The only thing she gained from those conversations was getting my son to cry.I told my son that its not ok for other people to lay their hands on him, hit him, slap him etc. That he is a person and he is worthy of respect no matter what his age is. I taught him the golden rule. Treat others the way we want to be treated and then told him that his aunt is in "time out" from our family until she learns this. I think he understands but it still hurts him...i dont know what else to do for him..any advice would be great. via /r/Parenting http://ift.tt/2EYrWSq