Oh, Shaunta, my heart cries for you and your family! What a difficult and emotional situation. I am so happy your dog was found and is safe and at home and sad you went through such anxiety and worry.
My father was a chronic liar his entire life. Dementia made his lies more hateful. He no longer had the finesse to lie discreetly or the mindfulness to remember what lies he told to whom. My experience has been that dementia only highlights and worsens what’s already there. Medical professionals may rightfully disagree, but that is what I experienced with my father, my stepmother, and patients I worked with in nursing homes when I was much younger.
If your mother-in-law is a chronic liar, you need to be aware and evaluate what she says accordingly.
Hoping for the best for you in a bad situation. Hugs from Florida.