The whole issue is yes, your sister and you would inherit her estate (with or w/o probate depending on state laws and what has been legally documented), but then passing things to the next generation will deal with taxes above the gift amount allowable that year.
Certainly worth doing the leg work to avoid taxation to the grandchildren. With mother having mild dementia now - need to get things done while she legally can sign documents.
My mother didn’t want to sign documents until my brother told her she was not losing the money she had with signing the trust papers (she agreed to sign 2 days before my dad’s death).
So, IMHO, get all the papers drawn up that are ‘best’ for the situation/state/agreement with your sister - and then have the people your mom trusts the most be at her side to sign them. Figure out the right way to say it to your mom so she ‘buys in’. My brother knew how to say it to our mother.