How Do I Deal w/ My Step Mother IN LAW?

My step mother in law is the mega beast. She has to be the most miserable person I know. She has done so many petty things. Not just normal things, once she started telling people I gave my son up for adoption. Which was no where near true and had absolutely no ground for basis. My hubby is not my sons father but he has raised him since he was 2 and he is our only child. Our son is now 16 yrs old. Why would she do that? Then one time she called our house and my hubby and I were arguing and she demanded to know what about and I told her nothing its not a big deal so she showed up at the front door with the police. She told the cop we were hitting each other and we weren't and the cop took us both to jail. We cut a tree down in our yard and she cussed us out in front of my family. The tree was gross and making mold grow on the house. She cussed my hubby out all the time for no reason and threatened to kick us out of our house which my husband is buying from his dad. It is premarital property. She also continues on about being 10 yrs younger then his dad and tells my hubby don't think your inheriting anything b/c you father won't out live me. No one likes her b/c she is so petty and I don't like dealing with her b/c I am an slightly above average girl and I don't have problems with people ever. Well one day I finally got angry enough to tell my father in law about all the things she did and says and lies about. I told him I wasn't dealing with it anymore. He told me if I didn't like it I could hit the road so I told him no you can hit the road. Then I put them both out of mine and hubby's life for 5 years. Then my hubby's grand dad ped away and we let by gone be bygones. It has been wonderful for the past year or so but she still does petty little things. She acts like I can't have an opinion of my own. And she is an out of the blue smart ***. My hubby and his younger sister who is 12 are just getting to know each other and yeah his dad has been super good to us. I can't just break it off again but it's destroying my peace I had without her in my life. What do I do? I deserve to be respected.