There's only one answer to this question, and no one here can deterime the final answer. You need to sit down with your sister (and your wife at the same time) to establish ground rules for the house. It is a big challenge for someone who doesn't have kids to understand how self-willed a 3 year old can be. On the flip side, not everyone is a good parent.
The rules that you set up in this meeting will not work in all circumstances. You will have to revisit them as time goes on.
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