set up family sharing iCloud

Hi. Can anyone explain how a shared iCloud account works please?  Currently I have an iCloud account 50GB and my wife has an iCloud account 50GB.  I’m running low on space so have upgraded to 200GB.  We have family sharing from my account.  It says we can both use the one shared account in future.  I can’t see how to cancel my wife’s account or how to link them on iCloud.  There doesn’t seem to be any way of cancelling her account.  But if I downgrade hers to a free 5GB account will it then automatically link the two?  I’ve just done that but it just says hers will now be downgraded in a months time and loose all her data, says nothing about linking. Any help greatly appreciated.