The Dark Knight actor Heath passed away from an accidental overdose of prescription drugs in 2008 when little Matilda was just three years old.
She is being raised by her mother Michelle Williams, the former girlfriend of Heath.
Speaking to Australia's Herald Sun Confidential, the late actor's sister Kate had nothing but praise for how Michelle is raising Matilda and says the family will always keep Heath's memory alive for his only child.
"I love telling [Matilda] stories about her daddy and how he grew up. I think it's so important for her to have a good sense of where she comes from in order for her to get to know herself," said Kate.
She added: "Michelle really does keep things 'real' for her and her existence, although different from most, is as normal as possible in an abnormal world."
Michelle has chosen to raise Matilda in New York, rather than Los Angeles, and the mother-and-daughter are frequently pictured out and about together doing normal activities.
Kate isn't the first member of the Ledger family to praise Michelle.
Two years ago, the late actor's father Kim told E! Online: "Michelle does a great job. She protects her the way that she can. She protects her from too much exposure, sending her to a lovely school; she's growing into a polite, beautiful individual."
Kim also said that Matilda is taking after her father: :She's got daddy's eyes, and she's quite tall for her age. She's a beautiful child. She reminds me of Heath every time she opens her mouth. Every time we chat with her she's got some of his nuances that gives us something to chuckle at."
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