Is correct to say 'I dreamt that my passed-away grandmother returned back to my home...' (as I dreamt about the time when she was alive, not returned as a ghost)?
I don't feel like to say 'my died grandmother', I feel that sounds bad.
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If the person I am speaking to knows my grandmother was dead, I would just say:
If the person did not know, I would still say the same unless the topic is related to her passing. In that case:
my late grandmother
5) having recently died
Definitely not "my dead grandmother", which would be disrespectful.
There are various other phrases, for example "my dear departed grandmother".