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All of this paperwork was filed in 2017 when she was of sound mind. She has since developed dementia. Now her daughter is trying to have her create a new will. Is this possible?

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Not if she has been declared mentally incompetent, just having dementia doesn't mean that one is incompetent.
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Does mom have a neurological exam showing that she's not of sound mind? I'd run to get her one ASAP and talk to an attorney about obtaining emergency guardianship until that exam can be completed to prevent the sister from taking advantage of her **IF mom is truly unable to make decisions.** Maybe your atty could go visit mom with you and make his own assessment. The legal bar for competence is VERY low. It's basically what's your name, do you know who that person is, and other terribly simple questions.

If there's no problem found, the emergency guardianship expires (and you are on the outs with both, and probably will not inherit anything and POA will be revoked). If there is a problem, then you prevent someone from taking advantage of mom.
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A good lawyer will do nothing if he can see the person is not of sound mind and being coached. One lawyer I had took my nephew in another room to talk to him.

I agree Gmom needs a neurological eval. Get the diagnosis in writing. Good idea if POA is based on Mom being incompetent before POA takes over.
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Had to look up "warranty deed". All this means in Gma can sell property to your husband that she owns free and clear. No leans against the property.
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A Warranty Deed is exactly that:  title is vested in the grantor, who conveys it to the grantee.  It does NOT have to be title free and clear of liens.   Someone can sell a property subject to liens, which either are discharged (depending on the situation), or obligations acquired with title transfer (assuming the lien holder agrees). 

Liens can either be discharged by the seller or assumed by the buyer.  

In fact, anyone who buys property with a mortgage is taking title subject to the mortgage, which is not a "free and clear" interest.

A Quit Claim deed doesn't provide warranties as to title; it's a transfer of someone's interest to someone else, w/o warranty.


Amanda, whether or not someone can create, or amend an existing Will, depends not just on dementia but on cognizance.    Someone can have dementia and still be capable of executing legal documents.  This is where the medical evaluation comes into play.   

The daughter's efforts to "create" a new will, could in fact be addressed by a Codicil as opposed to a new Will, depending on Grandma's mental state.   but the daughter can't "create" a will for Grandma, nor can she force Grandma to do so.
  
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