Hi Maria
As you can imagine this can be fairly complex, but I'll try to lay out the baseline for you. Firstly. all local authorities (LA) need to refer to CRAG (Charging for Residential Accommodation Guide) which is available here
http://www.dh.gov.uk/en/Publication...tions/PublicationsPolicyAndGuidance/DH_073650
For your situation as you've outlined it, your MIL will (assuming the LA agree that she needs some form of residential care) be paid for by your LA - her savings are below the threshold. Her pension(s) will be clawed back and she will be left with £20 per week personal allowance. If she's receiving attendance allowance that will stop. However, all LA's have a basic amount that they pay to homes and depending on where you are, you may find that a) there are no homes in the immediate area that will accept your MIL for this amount or b) the ones that will aren't places you would find acceptable. Note: many homes will quote you as a private individual one price, but accept LA funded clients for a lot less, so don't assume that any price quoted is necessarily the final rate. Anyway, you as family members have the option to pay a top up, but obviously that's going to depend on your personal circumstances.
One thing that concerns me from what you have said: your MIL
no longer has her own house. If by this you mean she has owned property in the past, has sold it, but no longer has the funds from that sale, you may have issues with the LA about intentional deprivation of capital. It's all about intent, and to a lesser extent time. If she owned a house, sold it with no expectation that she would need care in the future that's fair enough. However if the money was spent in the knowledge that care would be needed in the future then here would be problems. There is no set time-frame when this does not need to be considered, although, obviously the longer ago, the less likely it is to be an issue. Be aware though: it's not unheard of for the LA to have no idea what the rules actually say. I don't think it's a cynical attempt to circumvent the guidelines, but more that no one calls them on it.
P.S. I'm moving this message to the main support forum where you may get more input