I personally agree with your wife that once you remodel the home and make it your own, it won't even seem like the same house you once worked in. Also, memories fade with time. What's fresh now will be a distant memory for you in a decade or so.

The house I'm living in now once belonged to my wife and her ex. When I moved in, some of her ex's stuff was still there. Almost fifteen years later, I don't think of this house as being in any way associated with her ex (and neither does she). The walls are different, the flooring is different, the backyard is different, the lives being lived inside the space are different...it's a whole new house in so many ways. And it's a house we never could've gotten if I hadn't been okay with accepting a house that carried baggage at the time I moved in.

If this house truly is perfect, I do think you'd be silly to not even consider it simply because you have memories attached to the space. If you'd taken care of an ailing relative or loved one there, I could maybe understand. But this was a patient. Even if the experience always lives on in your memory, the edges will soften with time. And the house is the least important character in that story, if you know what I mean.

Maybe look at it another way. You brought this person comfort. They probably would've been pleased by the idea that their home would go to someone who cared about them at the end.