drizl I think your husband is being incredibly selfish and foolish. It is brilliant to want to help others but wrong to cut you out of such a major decision.
I think in your shoes I would focus on the fact your MIL could easily have left her money to charity or discussed this idea with your dh while alive. The fact she did neither (I assume) means she did not wish to do this! She probably imagined you both enjoying the fruit of her and your FIL's labours and your children having the benefit of it too. Your dh is wiping all this out in favour of what he wants.
Yes, it is only money but what it can do is liberate you from money worries/pay a mortgage/maybe start a new hobby or even business you could not consider otherwise/secure expensive and valuable education for your children. All of which you know.
I would suggest some mediation because it is possible your dh is having some sort of mini breakdown based on the death of his mum. Was it sudden, unexpected, especially painful etc?
I think one thing you could do is ask him to put the money in a secure account for a period of time and allow him to seriously think about this. It sounds like his giving away the money could damage his marriage and his relationship with his children.
For me one part of this is that you and your dh lived next door to his mum for a long time, you were involved in her life and it must be very hurtful that you have been cut out of this so unceremoniously. I think your MIL would be horrified by this.
If he were the sort of man who was always giving away money it would make more sense, but if he is not, then this behaviour is very out of character and should be challenged. Is there a trusted family friend who could talk to him?