Hmm. Well, it's hard to say for certain how I'd have reacted if I had a middle name other people thought was ugly or funny, etc. I was somewhat shy and easily embarrassed by teasing, but I was also very close to my grandparents and highly interested in my ancestors and family history. I think I'd have probably liked a handed-down middle name, even an unpopular one, if I grew up knowing the story of where it came from and why she was special to my mother. What I remember distinctly is that my sister always thought her own name boring (she had a fairly common first name and a "filler" middle name and she'd met a few other girls through the years with exactly the same combination) and I was secretly happy that I hadn't got one of those. I also recall that at high school graduation, we were asked to indicate how our names should be read off publicly and could choose to include or not our middle name or middle initial.
Since middle names are rarely used in public settings and since she'd likely have a choice about disclosing it, I don't see why it should be a problem to pass down your grandmother's name.
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