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You never know who your mom is going to be until you get there. Once you figure it out, try to enter her world. When she asked if her momma is still in the hospital, that was a huge clue that it is not 2012 in Mother's world. In fact, it is obviously before 1995. So, in her reality, her mother is still alive. Telling her otherwise is a cruel shock, and serves no useful purpose. If you want to talk about your gramma's passing, do it on a day when Mother is operating in 2012.
If you visit when your mother is reliving the 1950s then of course you cannot be her daughter -- she could not possibily have a child as old as you are! So she might see you as her sister or cousin or aunt. At least she gives you family status. Yes, talk about the present -- but her present. Ask her what her favorite thing to do on weekends is. Ask her to tell you about her mother. Did she date a lot of different guys? And don't be shocked if she talks about the past as if it the present, and she tells you about the guy who took her to the dance last week.
No matter what you talk about, you cannot talk her out of having dementia. So keep your conversations pleasant, and if dragging her into the present isn't pleasant for her, why insist on it?
"Creating Moments of Joy," by Jolene Brackey will give you some helpful insights into the minds of persons with Alzhiemer's.
it upsets them to find out , again, that someone has died.... and current events... shoot, even I don't want to talk about that, how depressing.... just let her know she is loved, valued, respected, and loved some more... that is much more important than trying to force her mind into the present... she doesn't always live in the present.... just go where she goes, that is the most loving thing you can do.... let us know how things are going.... hugs