BIL is destroying his family

I think you need to take a step back. You have said your b'n'law emotionally black mails his parents / threatening self-harm if they don't fund him and they are now left with only three years of their pension left. But your main gripe is they have not given money to your hubby .... if they had of done that they would be completely broke so is that what you are asking for?

This is not about your husband's inheritance - this is about two elderly people being financially abused by their son.

You need to take control of this narrative, and completely disabuse them of any expectation of you and DH bailing them out.

My suggestion would be that you and DH sit down with his parents and you both, together, make it perfectly clear that your priority is your children, and that you BOTH will do absolutely nothing to bail them out financially or domestically. You will not give them money, you will not house them should their abusive son rob them of their last penny. You MUST emphasize to them that they are completely on their own here. They need to have that information NOW, because otherwise they will keep going as they are. Knowing - and I do mean KNOWING - that you and your husband are not going to be their safety net is the only incentive they would have to protect themselves.

"They're clearly terrified of him hurting himself, and my FIL confided to my husband recently that he only has about 3 years of his pension left because of this (he's currently 78 and in good physical health, apart from his very bad anxiety). I feel this behaviour is coercive and we want to try and help them as best we can."
Why do you think FIL confided this to your husband? My reading is that FIL is lining you and DH up as the safety net. Do not let him! Make it clear that you will be no such thing, and that you will not allow them to rob their grandchildren - because that would be the effect of you being any sort of bail-out. They would be asking you to divert your resources from your children to them, and you do not find that acceptable at all. Keep hammering that point - your responsibility is your children, not them.

And if need be, I would point out to them that this is a problem of their own making, and they started making it a long time ago. I'd be completely hard-faced and lay it on the line - 'you did this to yourselves and I will not allow my husband to use our money on you. You might think you can appeal to him, but I've watched your partiality to your other son for years so believe me when I say my money is for my children and not you and your wastrel son.'

You are going to have to be VERY blunt, to the point of rudeness. You have to convince them you will not be bailing them out. Only if they are convinced of that will they have the slightest chance of not handing every penny over to your BIL, from sheer instinct for self-preservation.

Think it's all the parents fault. They are grown ups with the power to say no and common sense to know it's wrong. Think your husband needs to ask them what they plan to do when their pension pot empties? Are they going to rely on state pension? It's doable but will be a massive shock to them. Are they expecting your husband to help? I would not help as they'd only funnel some to bil.

His parents may think they can live in their home until they die under the equity release scheme and on their state pensions.

Be clear that you will not supplement them when they are out of money. Speak up now.

Why doesn’t your bil work? Has he never worked?

Yes, this.

I think you should spell out to your PIL what is happening and where it will lead to. I would make it clear that you will try to help them to say no to BIL if that's what they want. But they will get no financial/housing help from you when all the money is gone, because they are choosing to bankrupt themselves and you have got enough to do supporting yourselves and your kids.

Obviously it's massively unfair that they are giving everything to BIL and nothing to your DH. But you can do nothing about their choices. You can only spell out what your own choices will be.

From my own experience with my DF was somewhat similar and got worse over time. DB was very much the favoured child and received very substantial amounts of support during his lifetime. When DF got sick, he came to us. Saying quite explicitly that DB would not look after him [he was right of course]. So I had years of doing all the work and DF stopping for long periods. At the end of it all of course when dad died, I organised the funeral, but everything left was split "fairly" 50/50. I do not think in practice there is anything I could have done differently I am afraid. Speaking to DF would not have changed anything. Possibly I could have done nothing when DF was ill, but I could not have done that and I was aware DB would have done nothing for him, so I certainly would not have abandoned DF.

you’ve said DH has spoken to them, but have you both sat in front of them and had a completely honest and frank conversation? They need to hear the hard truths.

I don’t think it’s favouritism on their part. They are giving him more because he’s useless. That feels like favouritism but it isn’t. They probably just feel desperately worried for him.

that said, it’s an awful situation and essentially robbery of your DH and dc’s rightful and intended inheritance.

Make it VERY clear to them that you won’t be helping anything to do with them and you and your husband won’t be housing them when they run out of money and they will have to go and live with bil at his flat!! They have you down as a back up plan so if you make it clear that’s not happening even if they are homeless then they may think about stopping giving bil money!

You could run the situation past a solicitor to see if they think your BIL is blackmailing them (threatening to kill himself if they don’t give him money) or being coercive. There may be a way to protect their money etc.

Can your DH have a conversation with his parents, perhaps by bringing up what their plans are once the money runs out if they keep giving their other DS huge sums of money?

Otherwise, prepare yourselves for both PIL and BIL to be tapping you for money once it all runs out and the house has to be sold to cover the equity release.

They seem to be in a co-dependant relationship where they feel it is their responsibility to resolve the issue. Deep down they may not want to but don't know how to stop and are frightened of what may happen if they say no. Either that or they are frightened of him?.

Might either of those be the case OP?

This is the unholy trinity - financial abuse plus elder abuse plus coercive control. And suicide threats to get his own way is a classic abuser's tactic.

Your husband should keep an eye on them - especially if there any signs of incapacity. Look at having their situation investigated.

Of course it's gambling.

You should all stop seeing their parents as The Inheritance, and wrangling over 'where it's going and who's getting what and it's not fair.' This is their safe old age at risk.

Look to a future created by yourselves, instead and not as great expectations drifting away - start working with your husband on building a business, savings, investments, pensions etc that are yours.

It's quite possible they may wind up dependent on your DH, with everything gone once BIL has milked the cash cow dry.

And stamp on any wavering by your husband should BIL try to leech off him - that's your money, too.

https://www.ageuk.org.uk/information-advice/health-wellbeing/relationships-family/protection-from-abuse/financial-abuse/

You have 2 things going along side by side: concern that your in-laws are being exploited, and at the same time feeling personally affronted that your OH is not being treated fairly.
Both are real and valid concerns.
Sadly I do not think there is much you can do.
If you try and approach them about the financial vulnerability they are getting into you run the risk of being accused of being bitter and jealous because of the discrepancy in the way the two sons are being treated.
I honestly think you can only stand by and watch if they are of sound mind.

Sounds like they wont be much left to inherit tbh

Has your DH ever spoken to PIL about how he feels?

We have a similar scenario, but much less sums of money and he lives with PIL. I just distance myself from them, they will never listen or change unfortunately

But it will be the rest of the family that deals with the fallout when they pass and the house has to be sold to pay back the equity release and all other debts.

BIL will have nowhere to live, certainly won’t be opening any of our homes to him. Disaster waiting to happen

Really feel for you OP it’s so tough

This is absolutely beyond the pale. You mention that inheritance isn't a right which is true, but given the circumstances I would 100% be fuming as well.

I see both sides. I feel for them but also see the unfairness. Have you been direct with them over this? They really need to just cut the BIL off before they lose their house although it is very late for doing that.

What a mess. I just want to point out that I don’t think this is favouritism though. I think they have been manipulated and bullied over many years.
What would BIL do if your DH spoke to him about this?

I would be unable to keep quiet if my husband was being treated this way. I would really take issue with his parents and brother and make them see how unfair they have been. It may not resolve much but at least your husband will have had someone standing up for him