Hello,

My sister in law was recently diagnosed as having a "psychotic break". She was hospitalized and due to California state law she was released after 7 days. Since being released, she is drinking beer with her anti-psychotic meds and generally resistant to acknowledge any incident. She believed the TV was telling her things, and she told my brother that the 2 children (daughter 3 and son 6 months) were possessed and she shook her daughter and constricted her son by squeezing him. My question is: what steps can we take and what kind of documentation can we gather if my brother needs to go to court for custody?
My mother has flown across the country and lost her job to be there to care for her grandchildren and our sister in law is making things even more difficult now that she is back at home.

Thank you for your time,
Nancy

... what steps can we take and what kind of documentation can we gather if my brother needs to go to court for custody?.

He indeed does need to go to court. Immediately. Contact an attorney in your jurisdiction for details. The shaking and sqeezing of the children, if it can be proven, suggests that their lives are at risk.