I'm editing most of my posts that contain personal information; thanks for the responses to this one!
Edited by MrsSlocombe - 3/25/12 at 9:14am
I think you've already done what you need to.
Just a thought - what if you take one or more of the generous $500 gifts you get in the future, and put it in its own savings account and let it sit. Don't tell your mother or your sister about it, just let it sit quietly.
Then if your mother has a problem, you can give her the gift back - but that's all you can do. "I wish I could do more." At least it's something.
You've already been upfront with them about your position on it, so the only thing left to do is hold firm to what you've already told them.
When I had to have a similar conversation with my grandmother, I sat down with her one-on-one and asked her straight out about her plans. What she had set in place for when she could no longer take care of herself (physically). We had a long discussion about estate planning, legal documents (power of attorney, living will, etc.), etc. I know which banks she works with and where in her house to find the information on the accounts, but I don't have any idea how much money she has. I called her attorney (with her permission) and let him know that she and I had had a conversation and that he needed to be sure she had XYZ documents prepared. I made it clear to her that moving in with us is not an option, and asked her what plans she had. Then I started presenting options (some of which I knew she wouldn't like). When she didn't like my options, it spurred her to do some research on her own. So now she has a plan in place.
Personally, I would be less concerned with your mother and more concerned with your sister. Your mother has the property (which I assume is in her name?), which she can rent/lease/sell were she to run out of money. The conversation you should have with your mother is what she's planning to do when she can no longer physically take care of herself - is she going to expect your sister to do it? Estate planning types of questions are also in line - does she have a will? Does she have a power of attorney and a medical power of attorney? Living will? All important documents for all adults, but particularly seniors to have. You don't necessarily need to know the contents of the documents (unless you're her PoA or her executor), but just that she has them.
For your sister, this one is a lot harder. Tough love is probably the only way to go there. You don't have any responsibility to support her, and you've made it clear that you're not going to. So you just have to stand by that for the sake of your little family. It's not the easiest thing to do, but you have to do what's right for yourself and your kids.
Ultimately, you just have to remember that they're adults, and you cannot control their lives or behavior. They have the information they need, and if they choose to live with their heads in the sand, you can't stop them.
I'll be taking notes from this thread. My family's actually in similar situation. My parents are retired and my brother's unemployed due to mental illness. Except my parents live an upper class lifestyle, and my brother's in his 40s. He's married and his wife makes decent money, but I know their marriage is strained due to his mental illness and not working, who knows when she'll leave him? Plus they like to spend and not save. My parents pretty much expect him to drain their retirement fund slowly. :( They're paying his rent and utilities every month. DH and I will never take them in, we learned out lessons by letting grandma stay with us temporarily (and turned out to be 10 years). Yet it feels inappropriate for me to talk to them about their finances. Especially since they're all married.
I can see why your sister's not saving money. There's just not enough incentive. With that little bit of money she'll not accumulate much even if she doesn't spend any. You said she has depression. My brother has depression (and some other issues), too. She probably feels like life is such trouble and not worth living for a long time anyway. She's not planning for old age because she doesn't expect to make it to old age. :( The problem is of course she totally might. A lot of the conventional wisdom don't fly with people with mental illness. You probably do have some hope working with your mom, though. Does she have a will? Discuss with her about your sister's future and she should be concerned. Learning some money management (maybe give them some books) skills can never hurt.
Anyway, you're definitely not alone. All families of people with chronic illness or disabilities face such problems. Luckily your sister is still young and it'll be a long time before she's old. Lots of time for your family to plan and save for her old age.