Herbound, is your sister certain that her paint has died? They could have lied to her to get her off their backs? I dunno.
I agree that there should be some sort of fee associated with buying/adopting an animal.
I know that hindsight is 20/20 and all... but I might have chosen to give a "free care lease" on the horse rather than to give away ownership. In that case you've got a heck of a lot more legal justification for reclaiming the horse at any time if necessary.
The same has happened to a woman I know who trains and finds homes for mustangs. She halter trained a two year old and he was adopted (as all mustangs can be) for a small fee of $125. The poor guy was then left to sit around in his paddock for two years with no further training or work. He wasn't completely neglected, but was somewhat underweight and definitely far behind on his training. Eventually his paddock flooded and the mustang trainer I mentioned was asked to take him back and rescue him from the flood.
A few months later he's looking handsome as can be and has been advancing in his training... but he's still waiting for that person who really wants to take him home and give him a job.