The 55-year-old was found dead in her New York apartment on Tuesday morning local time, shocking her family, friends, and the fashion world.
Her niece, who stars in TV’s Marvelous Mrs Maisel, posted a video to her Instagram of her aunt dancing with her husband Andy Spade at a restaurant in front of a Christmas tree.
“Knowing Katy, this is how she would want to be remembered,” Rachel wrote next to the short clip.
The 27-year-old, who is the daughter of Kate’s sister Carol, described her aunt as “exceedingly kind” among other warm words.
“She had a light that words can’t capture but touched everyone she came into contact with.”
“She was exceedingly kind, beautifully sensitive, insanely talented, funny as heck and one of the most generous people I have ever known. She was effervescent.”
Rachel ended by telling anyone reading to “hug your loved ones extra tight today”.
Kate's brother-in-law, actor David Spade, also shared a fond memory of his relative at Christmas.
"She was so sharp and quick on her feet," he wrote of his brother's wife of 24 years. "She could make me laugh so hard. I still can't believe it."
Her husband Andy and 13-year-old daughter Frances Beatrix are yet to speak publicly, but in a statement, her family said they were "devastated".
"We are all devastated by today’s tragedy," the statement to The New York Daily News read. "We loved Kate dearly and will miss her terribly. We would ask that our privacy be respected as we grieve during this very difficult time."