Engagement ring-Gma wants it back

Location: CA
My husband and I have been married almost 7 years. When he was about to propose to me his Grandmother insisted on gifting my husband his great-grandmothers ring. They had is sized, cleaned etc. together before he proposed. I also have the original appraisal of the ring. The one condition was that he doesn’t change the setting of the ring until after Grandma passes, we hadn’t planned on doing that anyways as it is perfect the way it is.
Fast forward, still happily married, have a beautiful daughter…..Grandma is demanding the ring back as she wants to now gift it to her 60 year old daughter for her birthday.
We are in CA.
My understanding is that she has no legal rights to the ring. I intend to gift the ring to our daughter when I pass, to keep it in the family.

I would understand if I was getting divorced, I would then ethically return it to his family. But that is definitely not the case. My husband is livid.