It appears that his wife took it upon herself to have the mentally ill sibling sign a form giving her authority to handle his affairs. I think there should have been a discussion about this and perhaps a surviving sibling should have been appointed. Is this something an attorney should handle for the surviving family members?
Please note that only the ill sibling can appoint someone to be his Power of Attorney. Does he have times where he is clear minded so he can make a sound decision? Do you know if an Attorney made the change to the Power of Attorney to have the sister-in-law as his Power of Attorney.
Note, not everyone chooses a family member to be their Power of Attorney. Anyone can be assigned.