I personally assumed this was canon, but I've seen no mention of it in reviews or on TVTropes or anything, so I figured I'd pitch it out there.

Almost every event in the movie is not happening literally as we see it; rather, most of the 'weird' going-ons are the product of Annie and Peter's mental disorders, (Dissociative Identity Disorder and schizophrenia, respectively.) I felt the movie was very reminiscent of The Babadook, if anyone has seen that, in that the 'monsters' were a fabrication of the lead character's mind.

Early in the movie during Annie's visit to the grief therapy session, she mentioned that her mother had severe DID, (as well as dementia later in her life,) while her brother had schizophrenia. While the title of the movie at face value likely refers to the actions of the grandmother having effects on both generations after her, I believe that "Hereditary" also refers to its more literal definition:

"(of a characteristic or disease) determined by genetic factors and therefore able to be passed on from parents to their offspring or descendants."

Many mental disorders have been discovered to have genetic components to them, and while DID is typically assumed to not have a direct hereditary link, many personality traits and susceptibilities often can be, be it through biology or environment. Considering the way her mother likely treated her, it's perfectly reasonable to assume that her trauma led Annie to developing DID. Schizophrenia, on the other hand, IS thought to have a genetic component, and with the closest male biologically related to Peter on his mother's side (his uncle) having schizophrenia, it is very likely that it could have been passed down through his mother's family.

These points bear in mind that scenes typically take place from either Annie or Peter's point of view - the only scenes that are specifically from Steve's point of view are typically the ones where nothing terribly abnormal happens.

The sleepwalking is the first tip off to Annie's DID. While her sleepwalking is a legitimately possible excuse, another equally plausible excuse would be a different personality temporarily fronting. This personality may have developed as a result of her mother's behavior towards her pregnancies, the first of which she tried many, many times to abort. This personality may feel resentful towards her children, whom she never wanted to have in the first place, and was the personality that tried to kill them when she 'sleep-walked' years prior. Her episodes tend to have an impact on reality, hence why she wakes up in strange places with no memory of going there and suspects sleepwalking. This is likely how her mother's body ended up in the attic - someone who didn't live in the house would most likely have a lot of trouble bringing a body into it without having the knowledge of its location or where the tool to open it was, so she most likely did it when another personality was fronting. I also believe that the scene where Steve burned to death was only mostly correct from our view - he was found with the bottle of paint thinner on top of him, so it's very likely that she splashed him with the paint thinner in reality, rather than the book.

This personality also may have surfaced when Peter was strangled in his sleep, though that is equally likely to have been a hallucination of his own, because:

Peter has severe untreated schizophrenia. He shows many symptoms listed here such as lack of emotional responsiveness, (particularly when Charlie was killed,) apathy towards the world around him at school and with friends, and most importantly, hallucinations. Most of the abnormal things that happen from Peter's perspective have no actual physical effect - they're scary and cause him to act out, but they don't actually affect other people. The biggest examples of this are seeing his smiling reflection during class, constantly hearing Charlie's tics after she died, and finally, the delusion at the very end where he is crowned as the reincarnation of Paimon, (religious or general superiority delusions being some of the more common positive symptoms of the disorder.)

I'm personally unsure on which version of Annie was the real one at the end - the version that chased Peter into the attic and was banging on the door or the version that actually did kill herself. With the two being the only remaining characters at this point, it's hard to tell which perspective we were seeing through and which was grounded in reality.

I'm not a medical expert at all so I may have these disorders completely wrong - sorry in advance if I do.