We have secured durable Power of Attorney for my mother-in-law with dementia. What's next? How do we properly and legally notify people of the change?

Some agencies will want an "original" copy, so I hope you got several signed at the attorney's office. Most will make photocopies or you can send one. The bank where you will write checks will need one, as well as other financial institutions. Likely the clinic will want both a financial one (for responsiblitiy who pays) and a medical one. The government gets sticky over POA's - sometimes you need special documents with the VA and other government agencies so you will want to check on that. Remember that a POA is only good until the person dies. The POA dies when the person dies, which is why a will with an executor is important.

I had a heck of a time closing a bank account after my mother's death, because the POA wasn't any good. They knew she died but I couldn't close the account. I finally brought in the will and it had the correct wording so they closed the empty account. Sigh! Lots of fun.

You are wise to look into things ahead, but always keep a copy of the POA very handy. You may need one where you never dreamed you would.
Carol