My parent seems lucid but is already too far into dimentia to make good decisions on POA. What are our options?

We recently needed to update my parents trust to include the latest laws. But when we got to the part for mental POA my mom misunderstood and blamed me for looking for a way to put her away because I had mentioned before that her memory was not as good as it used to be. She has been accusing me of saying she has Alzheimer's (which I have told her that hers does not match the same symptoms as Alzheimer's but there might be some sort of dementia surfacing). She has breast cancer that is travelling throughout her body and could very easily be working up to her brain. Hers is more like she remembers differently rather than forgetting. And her thinking can wind up skewed and strange. But she blames me and accuses me of trying to put her away when I have never, and would never even consider that. But without the POA I know the state could force her to be in a mental institute if it came up. My dad had no problem with his POA with me as agent.

It is like she is too far gone to think clearly but can still function just enough so that the trust guy says she is mentally still ok to make decisions. Sometimes when she is not thinking she can do some weird things. I would hate it if someone from the state got wind of anything like that and tried to take her from us. She belongs with us as long as we can humanly possibly take care of her.