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I might be in this with my parents but do not have a fes thousand dollars to shake around. Please keep us posted. Will let youknow if I find our more.
The first step is the medical evaluation by her doctor(s). Just get a letter with their opinions of incompetency in writing. Next, you will have to hire a lawyer and go to court to 1) get her declared incompetent and 2) get legal guardianship. The second one could be contested by anyone who might be interested in her care who feels they could do a better job. Of course, the legal fees will escalate if guardianship is contested. More than likely, you will be given temporary guardianship first and then full (health and financial) guardianship at a later date. It is done like this so it can give whomever time to contest it. Limits may be put on any or all of your powers by the judge depending on several things, like your abilities, her financial situation, etc. You will have to make a couple of dozen copies of the final guardianship papers and show/send them to any doctors, hospitals, banks, credit cards, utilities, etc. that are in her name so that you can deal with them. They won't talk to you unless you have those papers filed with them. If you haven't done so, get named as her payee on her Social Security and/or retirement. You can usually do this without having guardianship or even POA.
This will take several months and a couple of thousand dollars (at least). I had to go through this because my husband didn't want to let go of his control and give me POA while he could legally do it.
That is EXACTLY what I did for my mother, and it allowed me to move forward with POA to sign papers on her behalf to sell her house, in the state of TX.
Being declared legally incompetent is, as it should be, subject to very stringent requirements. Judges don't take away a citizen's rights without looking very carefully at the situation.
However, whatever it is you want to do, it can likely be done without going to that extreme. Does someone have power of attorney? If not, you'll probably want to get Adult Protective Services involved (or whatever it's called in your county).
Given your MIL's behaviors, I'd try to be very careful to let the 'experts' be the 'bad guys'. If you try to reason with her, you will only wind up frustrating yourself and could cause her to distance herself further from family. Let the doctor, social worker, etc., dictate the plans.
If someone is declared legally incompetent then the question of guardianship immediately follows. However medical and legal incompetence are not the same thing. You need however to start with the medical and get her evaluated by a neurologist and psychologist if available. If not a GP can fill in. They will write reports with diagnosis that you can take to court and petition for guardianship. It is simple if there are no objections from family members and costs a few thousand. If there are objections, all hell can break loose legally and financially. If she has money, it can get contentious. Good luck!