How do you deal with fantasies in dementia?

It's a case by case decision, but I might deal with the false sad memories by changing the outcome to give it a happy ending as described upthread. AND I would discuss her crying with her doctor. My cousin had a time with crying, obsessing, worrying, etc. but medication really helped with that and she rarely does it. She stays pretty content.

I agree with Jessie's approach. There is no need to correct harmless fantasies.

The ones that make your mother cry are another matter. You don't need to get her "close to reality" -- just close enough to relieve her distress. "Oh my, that would be a really sad thing to happen, wouldn't it? I'd feel very bad about that, too. But you know what? I think your memory is playing tricks on you. That sounds like something that happened in a television show. It isn't something that happened to you. Aren't you glad?"

Mellie, my mother went through a time when she made up a lot of things. Most of it was harmless, so I didn't correct her. I didn't find it useful to tell her that something didn't happen, because that would just make her mad. Still, some things have to be addressed. So if she were to accuse someone of doing something bad, I would have to say that it wasn't true.

Something that drove me batty and does still is the time compression. Things that happened years ago were only last month. Something that happened last year were last week. The order that things happened in is jumbled now. It is impossible for me to correct the time distortion even when it is important. She may say she fell last week and I tell her it was a year ago. I'm wrong, because she knows it was last week. She has totally lost her sense of time. It is a mind twisting thing for a caregiver, particularly when the event "last week" is what led to a current problem -- one that could be imaginary.