Do we have to pay our sister for care she didn't give?

Proceeds from an insurance policy are payable to the beneficiaries named in that policy. No one has the"right" to have expenses paid out of life insurance proceeds before they are See also:
Caring for Elderly Relatives: How to Handle Family Conflicts

See all 379 questions about Paying for Care distributed to the beneficiaries.

You state that you were told that certain expenses your elder sister claims you owe will be taken out of the proceeds BEFORE they are distributed to you. Who told you that? I doubt it was the insurance company. I suggest you demand, from whoever told you that, proof that taking these expenses out first is required and legal. Also, if you know the name of the insurance company, contact it and state that you want the proceeds distributed directly to the policy beneficiaries.

Whether you and your other siblings will be responsible (eventually) for some of the costs your elder sister claims she paid for your mother is a complicated matter. It would be best If all of you can somehow resolve this informally through your own negotiations, Otherwise, you could end up with lawsuits, a disaster for any family.

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good answer but what if the trust is the beneficiary on the life insurance

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