My Mom (92) lives with us. She has not been diagnosed with any dementia. My husband and I care for her but she is semi-independent, no longer drives and needs attention. I am caring for three older children at home one with special needs. I am her only child.
Just sweetly call her bluff. It is her money and she can change her mind about what to do with it as often as she wants.
But speaking of money, I hope she is paying room and board with you. You might mention having that little detail formalized the next time she talks to her lawyer.
This does not necessarily sound like dementia, but more like a silly attempt at manipulation. Do keep your eyes and ears open for other symptoms, however. It is the entire picture that tells the story.
People who think that they must use money to bend others to their will are very insecure folk. They deserve our pity, but I believe we should stand up to them and call their bluff.