Anna's sister Alex and her mother are dead due to the accidental boathouse fire and their ghosts are trying to warn Anna about this dangerous black widow woman known as Mildred Kemp. Mildred had murdered her 3 children and her first husband, and managed to get away by changing her name to Rachel. Anna's mother was sedated by Rachel and she was disabled which caused her to remain in the boathouse and Anna had discovered many syringes as evidence.
Rachel tried to marry Anna's father, who was unaware of the danger and the malicious intention of this woman. Anna also knew that the necklace that Rachel has is exactly identical to Mildred Kemp's necklace. Anna tried to warn her father but her father did not believe her, or believe in ghosts. Anna killed Matt because he did not believe her, and he knew what really happened on the night of the fire: Anna arrived home to find Rachel and her father having sex. Disgusted, she went to the boathouse to fill a watering can with gasoline so she could burn down the house. She did not shut off the faucet all the way, and when Alex arrived she knocked over a lantern. The boathouse exploded, killing Alex and her mother.
Anna was the one that finally stabbed Rachel to death and not Alex. Anna was arrested and institutionalized. The psychiatrist comes by to see Anna, and she tells him "I finished what I started," meaning to return home and kill Rachel. Standing in her room with pearls in her hand the ghost of Mildred Kemp says "welcome home" to Anna who smiles back at her and the movie ends.
The irony is that Anna was right about Rachel / Mildred being dangerous but she was also mentally unstable herself. Anna was also right about the 3 little children being sedated and stabbed by Rachel / Mildred since that is what she had read in the old newspaper, so this is not just her hallucination.