Nicole Kidman, the kids and the servants are all dead. The intruders are a family that moved in. Kidman killed her two kids out of madness and then shot herself. The servants died more than 50 years ago because of tuberculosis. The living family moves out because they are too scared to live in the house as a result of the haunting of these ghosts.
Continuity mistake: When Grace and Ms. Mills are sitting in the living room you can see a clock on the right, but in the next shot it's disappeared.
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