An Early Inheritance
Andrew's mother-in-law isn't in a great position to give money, but she's doing it anyway.
Dave's ANSWER: This is like taking donations from poor people because they refuse to address their own issues. That's just weird.
If she’d rather give it to you than her waste it, how about none of the above and she learns how to handle money? You obviously can't say that to your mother-in-law, but that message needs to be delivered by your wife.
You say you've been taking the money and setting it aside in a savings account for her, which is fine. You and your wife have it emotionally earmarked for your mother-in-law's care. That's fine–you are just her bank. No matter how much confrontation you engage in, you won't be able to get her to move the needle, so maybe you can just protect her from herself. But I hate treating the symptom instead of the real problem.