Legal Question in Wills and Trusts in Pennsylvania

I'm not sure how you living upstairs has anything to do with ownership of the property.

The grandmother, if she decides to leave the property to her granddaughter (your wife) and her son, she can make a will leaving the property to those people. Nothing will change in your living arrangements when the grandmother passes, assuming that there is enough money in the grandmother's estate to pay her other claims/debts.

If the house is owned free and clear, grandmother could also deed the house to her son and granddaughter, keeping a life estate for herself.

From a tax perspective, its better to inherit the property as the beneficiary gets a stepped up basis. So if the grandmother bought the property a long time ago and owns it free and clear there is going to be huge capital gains tax on it unless it is passed at grandmother's death.

Also, I don't know if grandmother lives in the house or in a nursing home and if grandmother may need Medicaid or is on Medicaid there are these considerations which would preclude a transfer of the property at this time.

I suggest that grandmother meet with an elder care/estate planning attorney. The attorney can review grandmother's situation and her assets and decide on the best method of transferring the property to son and granddaughter if that is what the grandmother wishes to do. The money for an attorney will be well spent and will ensure that grandmother's wishes are fulfilled and that the transfer is accomplished properly.