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Hi and welcome to JA. Ray here to help you today.
I would write or email her confirming that this was an intervivos gift to you and your husband. I would decline to pay back since it was a gift.She would have burden to prove otherwise here , you and husband would testify it was a gift.She has burden to prove otherwise if she sues.Sending a letter or email for your files just documents that you considered it an intervivos gift here under Arizona law.
Here in Arizona the three elements required to establish an inter vivos gift are (1) a donative intent on the part of the donor; (2) an actual or symbolic delivery of the subject matter of the gift; and (3) an absolute and irrevocable surrender by the donor of ownership and dominion over the subject matter of the gift, at least to the extent practicable or possible, considering the nature of the thing to be given.
This appears to be an intervivos gift nothing more.