Interesting that your aunt cared for their mother for 30 years, drawing a small compensation rate, and your mother just took an interest in grandmother's care decades later when her inheritance started to dwindle.
One important correction: The grandfather was aware of the finances for the first 20 of 30 years, the OP says that the losses occurred "since that time". So it's 10 years, not 30; multiply any compensation by 3.
A second, more important correction: the 'compensation' to the aunt comes from drawing on grandma's assets and also her income. OP asserts that grandma's income is $7k/month, or $840k. Added to the $400k in assets spent/lost, this is one and a quarter million dollars.
$13k/year is not enough to be visibly irresponsible with money, it's a reasonable or even small rate for family care. But $125k/year is unsustainable, as demonstrated by grandma's dwindling assets.
Regardless of the cost of living, death does very strange things to people and can flip an entire history of a relationship on its head. It happened with my family where a relatively calm and expected death ended up estranging members of the family because of what the deceased had written in the will.
I really am not looking forward to my parents' passing, as I live (and probably will still be) living abroad, though I am executor of their estate. Inheritance always brings out bad blood.
It's a common pattern: Family "takes care" of an elder while blowing through their money. Money now depleted, a more responsible family member steps in to manage the final years, only to be vilified by everyone who rode the gravy train in.