The Emperor insisted Rey was his granddaughter in Star Wars: The Rise of Skywalker — but Rey was never really a Palpatine at all. The mystery of Rey's parentage ran through the entire sequel trilogy, from pretty much the first moment Rey was introduced in Star Wars: The Force Awakens. She finally learned the shocking truth in Star Wars: The Rise of Skywalker — even if she did ultimately choose to reject it, claiming the mantle of a Skywalker instead.
According to the Emperor, Rey is in fact a Palpatine. At first readers believed this meant Palpatine had a secret family — a lover, children, and now apparently a granddaughter. But the novelization of Star Wars: The Rise of Skywalker revealed Rey's father was actually a clone, created as a potential host for the Emperor's spirit but found to be lacking in the Force. More details will be revealed in a future tie-in novel, Adam Christopher's Shadow of the Sith, featuring Anakin and Luke Skywalker, which is to be released on June 28, 2022. But the little revealed so far has already confirmed Rey was never a Palpatine at all.
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The best parallel is with Cut Lawquane, a clone trooper who abandoned the Grand Army of the Republic at the height of the Clone Wars. Cut Lawquane settled on Saleucami, marrying Suu Lawquane and becoming the father of her children, Shaeeah and Jek; Clone Force 99 paid him a visit in Star Wars: The Bad Batch, helping him leave the planet. Strikingly, although the Bad Batch considered Cut Lawquane part of their family, there was no suggestion his children were considered Jango Fett's grandchildren. By the same logic, then, Rey being a Palpatine isn't quite accurate.
It's certainly in-character
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