Before sitting her down, I would talk to a lawyer and see what they suggest. Make sure you have something to stand on when she puts up a fuss about her owning the horse, not you. Even if the lawyer ends up saying she owns the horse, you may be able to at least threaten to be compensated for all the time and money you have in the horse. But talk to a lawyer, know what you can and can not do in this situation before talking to her. If anything, you'll be better mentally prepared for whatever the outcome is. Good luck, keep us updated!
This is what happens when you have democrats in office