In the paragraph Invite People to Join Your Family on the Set Up Family Sharing page Apple describes the process of inviting family members to a group. They retain all access to their existing space, but when they accept the invitation will have the storage capacity of the Family group.
The billing for her old 50GB plan will cease.
There is no 400GB plan. This sounds like you have commenced an Apple One subscription where you had an existing 200GB iCloud Storage plan. As described here, you are in the free trial period of Apple One and enjoy the 200GB iCloud storage plan an addition to the 200GB of the trial Apple One plan. "During the free trial, you keep both your current iCloud storage plan and the iCloud storage in Apple One. Once the trial has finished, your current iCloud storage plan will be cancelled. Your total iCloud storage will be the amount included in your Apple One subscription."