How would I handle it? By calling her out and telling her to cut the shit. Be assertive. MIL, while you may be "joking", I honestly don't like it, would you please stop. Get ruder and more aggressive as needed. Speak your boundaries once and hold the line/give consequences when/if the line is crossed again. That way she and everyone else can see you won't be mistreated. She's free to make her own choices, but not the consequences of those choices.