Hi -- this is a frustrating issue! It's hard to accept but as already noted -- you don't have a housetrained dog and maybe, didn't have one for very long, when you thought your did -- this is a such a common issue for all of us!
Housetraining two dogs at once is extremely difficult and might have been one source of the problem not revealing itself too clearly at first?, and if both were not under constant observation for many weeks even after you believed them to be housetrained, it is likely one or both were going indoors for some time, but as their pees would have been very small when they were young, and dried quickly, this simply went unnoticed. Housetrainng really does require constant management and observation -- and many of us assume our puppies are housetrained based on a week or two of seeming perfect results, when really they will almost always have many many weeks of training needed and often start right back in having accidents. Once they go once, they will keep returning to those places unless you clean with enzymatic cleaner (a vinegar solution works too). You need to throw out all the existing beds and perhaps -- the rugs too unless you can get them cleaned with enzymatic cleaner. You can buy a blacklight setup that lets you spot wee areas even long after they have dried out and that would be worth looking into.
Then -- as noted above! -- you need to go back to square one. NEVER any punishment, constant supervision, use a crate when she cannot be at arm's length, on a lap, or tethered to you by a lead. You did the right thing by checking for a UTI first with your vet.
What to do now? I'd advise downloading the free book, After You Get Your Puppy, from
www.dogstardaily.com/free-downloads, which will give great advice on housetraining systems. There are also many links at all the training sites pinned at the top of the Training section.
Also: I think you might want to think about stress as a possible cause of problems -- perhaps in both your original cavaliers.
Having a new puppy may cause stress for your problem dog, who has also been through a lot of disruption and will have lost her sibling. This alone is often expressed in accidents. Also, are the children always managed around her, and vice versa? Children under 7 or so should never have access to a dog without constant adult supervision and even older kids can be far too rough accidentally, and even quite cruel (just as kids can be to each other once an adult is watching them). Over my many years of doing cavalier rescue, to be honest, a lot of 'problem' dogs actually were stressed dogs who just were not very happy living with children, sometimes as they were quiet, shy dogs to start with, and sometimes as the kids were loud and active, and also might be hard on the dog when parents weren't watching.
If you had a snapping dog already, I'd really be considering this as a potential aspect, and want to be very careful on this issue (I am not sure how a snapping problem could be assessed as 'genetic' -- I've done training on managing difficult dogs and had the very rare snappers (only two out of hundreds of dogs over 7 years) assessed a few times by qualified trainers and as far as I understand, I do not believe it is possible to assess snapping as a genetic issue. Very rarely -- and especially rare in this breed -- there could be a temperament issue but this would seem especially unlikely in related sisters where only one was snappy -- pain or stress or poor socialising are the usual causes of fear aggression (there rarely is any other kind, especially in cavaliers)... so I'd just really encourage considering this as a possible issue for both dogs -- that they are feeling under stress from kids and your remaining girl might simply need a lot more separate time from children, and always, somewhere to go that is off-limits to kids (a puppy xpen with acrate she likes is useful), ad more careful management around children.
If you work kindly on housetraining for a while and things don't improve, I'd really consider having her assessed by a CPDT qualified trainer (their website will give trainers in regions across several states/countries). These are trainers who go through proper science-based training in canine behaviour and psychology etc, not just self-pronounced experts who typically know little and often give very poor advice (vets are also very poor on dog behaviour issues, too -- not an area they get training in). If she is really under stress and this is causing her to be expressing stress by weeing on her beds and on rugs, then you'd need to consider potentially rehoming out of kindness to her and t prevent anxiety perhaps turning into a second snapping dog -- but that's a last resort and really, retraining, and some management, shoudl resolve your problem.
There are very good links on making sure kids and cavaliers mix safely and happily, pinned to the top of the training section -- I'd really recommend checking out some of the links.