My grandma is 85 years old and is miserable, saying she wants to be in the ground already. What do we do?

Visiting my elderly Aunt at her Sunshine Cottage, she said to me: "I don't know why God is keeping me alive so long".

I answered: "For me". "I need my Aunt".

Then we went out for ice cream in my 34' RV, and she loved it because she and her husband had frequently visited me in their huge RV in their retirement years.

She is telling you the truth, and you don’t respect her enough to accept it? I pity her, because she has no easy nor legal way of accomplishing her very understandable wish. She has had enough, and she is tired. Just say, “I get it!” And leave it right there.

I think when your mother says she wants to be in the ground she is saying she is just so miserable she can't see a way out, or an end to the sadness. Most of all she may be saying she has nothing to look forward to. As unlikely as it sounds, maybe suggest to her how she can help someone else with something. Maybe another resident needs a walking partner. Or maybe you need help identifying people in a photo album. Or maybe find a TV show you two or another resident can watch every week. Anything she can do to take the focus off of herself for a while. Tell her you'll do it again next week. I hope you find something to help the situation.

Seems really cruel to keep her "living" in this sad state. I wonder if in the future people can leave instructions to doctors and families to help them die peacefully before they plunge further into dementia, depression and/or craziness, and lose all their humanity and dignity.

meganoc, I am sorry I don't have any answer for you, but I do sympathize.

Yes. Her feelings ARE valid. It is however, important to try to figure what is manipulative behavior, what is drama, what is true depression, and what is logically truth-telling. There is a huge difference. Depression may be helped with mild anti-depressants and it is said they even help with chronic pains in aging. Manipulation needs to be simply accepted with a "I understand; this is very difficult for you and I am so sorry". Drama needs to be treated with the same pat phrase. And truth telling is just that. Many people, and my own dad and many patient were among them, are over it all. They are exhausted with life and sustaining loss after loss after loss and truly wish they could simply go to sleep now. Families often greet such truth telling with "Oh, NO..............blah blah blah" without simply listening to the truth the elder has to say.
Be certain there is POA clear, advanced directive, plans for hospice and or palliative care in place. Ask questions and listen. Do not negate what is said to you. And that's the best you have. We can't, you are right, press a magic button.
There is no peace for some. Life isn't always about peace. sometimes life is about raging against the losses, against the continuing loss upon loss upon loss with no upside, upon the helplessness. We need to be heard. We need to be acknowledged. And peace comes when the last breath is drawn. Life is full of travail (as it is full of miraculous beauty). It ends when we are gone, and not before.
So simply listen. There is no more to be done. Tell her you understand. You acknowledge her pain. You wish you had a magic wand. And you feel heartbroken to her pain. There's not a fix for everything. And certainly not for this.

How about...
"Grandma, I will be real sad when you die." "I know you are not happy right now and I understand how you feel." "Why don't we go for a little walk." Take her for a walk inside or outside if you can. Find a nice spot and sit and talk, if you have a snack handy some fruit or other treat she likes. If there is an activity that she or both of you can participate in that might be a good diversion for her. When you leave after your visit do not leave her alone in her room bring her to a common area and try to get her involved in an activity or get her something to drink so that she has something to do.

I would say to just acknowledge to her that you're aware that she wants to die, and you're sorry that she feels that way as you will miss her when she does.
There is no reasoning with someone with dementia, so you're best to just acknowledge what she's saying and then change the subject and move on.
If nothing else works you can do what a gentleman in my caregivers support group did when he was unable to redirect his father, and that is offer ice-cream. He said it worked every time.