Your husband did the right thing by filling in the form based on the worst days, that is exactly how it is meant to be done. Because of the nature of dementia it is well known that abilities fluctuate from day to day.
My husband was 58 when diagnosed and too young for attendance allowance but we were encouraged by Alzheimer's Society to apply for PIP asap and were given the same advice to to outline how things are on the worst days.
Being in the earlier stages at that time, and never having claimed benefits before, we both felt reluctant to do so as the diagnosis had only just been made. The AS adviser said to apply anyway - the assessments would take months to arrange and, with dementia things could change rapidly.
We continued to talk it over with the experts (AS, Age UK and Crossroads) and reluctantly made the decision to apply.
We both expected to get the lower rate at most at that point. As well as completing the form my husband was visited at home and assessed against the information provided on the form. About a week later we received confirmation of qualifying for the higher rate.
My husband said he felt like a fraud but I reminded him that we had answered honestly based on the worst days and, on top of that, he had been assessed individually by an official who understood about dementia and had been able to draw her own conclusions from the (nearly) two hours she spent with us asking questions and generally assessing.
What made us feel even more awkward at the time was that we also received a large lump sum as the allowance was backdated several months to the date our claim was originally made.
I soon stopped feeling guilty about applying for PIP so early on. As predicted by the AS adviser, things did change and it wasn't that long before the 'worst days' scenario became an almost every day scenario. It was a relief that we already had PIP in place rather than have waited to start the application process when things were more difficult to arrange and attend for assessment because visits to the GP and health clinics were much more frequent.
The allowance was a blessing and we were grateful for it. My husband was (and is) entitled to it. It helped pay for aids around the house, appropriate floor coverings and days out and breaks to keep him active and stimulated while he was able to enjoy them.
I put the lump sum aside until such time as needed. We are fast approaching that time as I will be dropping my work hours and going on to carers allowance. Money will be tight but the lump sum will help us fund an extra day per week at a day centre and give me a much needed break from being a 24/7 carer. My husband loves his day centre and me being able to rest as a carer will also benefit him in the long run.
I think it is common for people to be reluctant to accept benefits but it is what your mother-in-law is entitled to and it is right that your husband took the initiative to make sure she receives that entitlement.