I agree with the person who suggested your DH talk to a tax person before returning the money....it's one thing to want to get rid of the headache, but not if your taxes go up as a result. I like the idea of putting it into college funds for your kid(s) and cutting off on contact.

OP here. Thanks for all the advice. FIL's threats were verbal so we don't have anything written. We do have the dates of these threats because I texted my MIL about it. The preschool is in a secure federal building to which they have no access to. If FIL does anything, we will make sure to document it so we can pursue legal actions. FIL also has substance abuse issues too which makes him more unstable (e.g. trading his prescription pain killers for drugs, getting angry when his stash runs low, etc). Most of his anger and outbursts are more directed at MIL so we don't get the brunt of it. I think FIL has borderline personality disorder but there is no way to know for sure since he will never go see a therapist.

OP, do you have that threat from your FIL in writing? Did he email it to you or was it written in response to your husband's letter? Take that, if you have it, and file a restraining order now. Even if you don't, speak with a lawyer, and see what your options are.

What you've described is really scary. Protect your family. Yes, have your locks changed and install a security system. Press charges when your FIL violates the order. It will be the more difficult thing your husband has ever done, but this whole scenario is terrifying - you'll probably have to take the lead on this because your husband is so used to the abuse, he can't see how wrong it is

Also, let your FIL make a scene in front of your house if he shows up. He's the adult having a temper tantrum. Do not give in.

NOTIFY THE PRESCHOOL! Everyone working there must know not to let your child go with either grandparent.

Agree with notifying the preschool, changing the locks if they have keys, and putting an alarm and camera system in place. Also be ready to call the police and hire an attorney if he becomes abusive to you or your family on your property, starts stalking your DS or threatens you with bodily harm. I think your DH was right to give the remainder of the money back. Cut all the strings you can.