This is one of the things that you have to consider in your strategy. How did you end up with so many Sims in your first generation? Just curious.
You're playing a legacy, right? Not a Dynasty? Because the rules are different for each one. In a legacy, you can move Sims out of the house. In the Immortal Dynasty, you cannot. The game will allow a total of 10 Sims and pets, so you still have room as far as the game is concerned. Of those 10, you can have up to 8 Sims and up to 6 pets, as long as the total doesn't exceed 10.
If you don't like having a lot of Sims to control, you'll have to be very strict with yourself about not moving anyone into the house. Just the necessary Sims will be quite a few as you can easily have 3 generations in the house at a time.
I wouldn't recommend killing the extra Sims (sorry folcon). It's outright against the rules of the Immortal Dynasty and at least against the spirit of the legacy rules. I don't know for sure if Pinstar's legacy rules forbid killing of Sims. Your two best choices are to either move a couple of Sims out or expand the house. Legacy and Dynasty houses tend to get very large as you go further into the challenge, so don't be afraid to build. Money won't be a problem by the time generation 3 comes and by the end, you'll have more than you can spend!
I hope this helps.