I went through this with my grandmother a few years ago.
I spoke to her local cops, and got them to watch her. When an officer saw her doing something out of the ordinary, he pulled her over and had a long conversation with her. He later told me that he explained to her how upset he would be if she got hurt, if a more aggressive younger driver frightened her off the road.

She called me up later that day and asked me to come take the car and help her move to an assisted living facility of her choice. She did not tell me why, just that she chose to stop driving, and it was "time".

I did not have to confront her, the family did not take the blame, and she was not embarrassed.
She didn't lose her marbles for a couple more years, and she never knew I had engineered the change in lifestyle for her. She seemed quite relieved not to have to be responsible for all aspects of her health and safety any longer.

Best wishes in finding a solution which fits your own specific circumstances.

Smurf: My sincere condolences to your loss and to the betrayal of your friend's wishes.