Ok... backstory (apologies for length). About 9 months ago, DH's brother and girlfriend split up due to the fact that BIL found out she had been doing hard drugs, mainly cocaine and prescription opiates. She had been going out more and more at night and lying about where she had been, even went so far as lying that a close friend was in the ICU so she could get away for a weekend. They have a 5 year old daughter together. I won't get into all the shitty things she's done, but it was enough that he kicked her out after she acknowledged she'd been doing drugs and lying about it, and refused to get help. She took their daughter with her and moved in with her parents, and because DN was with her when the went to the preliminary hearing in family court, the court left DN with her until the first hearing, which was devastating to all of us considering what she was doing. DN started showing up to school looking unkempt, dirty, not wearing proper winter clothes, and one of the teachers alerted the Ministry (of Children and Families, like CPS). Even with the Ministry's involvement, the judge granted 50/50 custody to BIL and the girlfriend, so BIL has her a week on, a week off. After the first couple of weeks at her moms, she came to BIL with a yeast infection from not being bathed regularly. It was heartbreaking. BIL ended up getting a court order for drug testing the girlfriend, but he has to pay out of pocket for it, and for a hair follicle test which are more accurate for long term drug use, it costs $400.
Now, MIL has been very involved with this whole situation. BIL works full time in construction so she stayed with him to help take care of DN for about 2 months. He pays for the rent for the former family home, which is expensive, plus before and after school care (even when she's with her mom, who doesn't work even though she's able to), clothes and groceries (even when she's with her mom), and child support. So the $400 to get her drug tested which could possibly come with results that would give him full custody is so beyond his reach it's not even funny. MIL proposed that since DH and I live closest, we could pay for the test. This is where I get frustrated
I love that little girl more than words can say. She is the closest niece/nephew to us geographically and so we've bonded with her very strongly. It breaks my heart what she is being put through and what she is having to endure with her mother's drug abuse. That being said, DH and I are not doing well financially at all. We have been living off my student loans and his salary (which is crap) since January, and now loans have run out and we're having to take money out of our RRSP (similar to a 401k I believe) just to pay rent. BIL is family, so is DN, and I want to help them as much as we can but $400 out of our budget would break us. DH felt that we should pony up the cash and BIL could pay us back, but 1.) BIL NEVER pays anyone back and 2.) if he did, it wouldn't be for a while since he's so financially strapped that he can't afford it in the first place. DH understands this but feels guilty, and talked to MIL saying we couldn't afford to pay that for him, so she guilted him into agreeing to pay half the amount. I'm frustrated because we are not the only family who live close. He has 2 other brothers here, plus her, why does this fall only to us? I feel guilty saying that because I want whats best for DN, but at the same time I'm not prepared to cripple us financially, more than we are, to pay for this. I suggested that everyone contribute $50 for the test, and MIL told DH that I was being selfish, and "of course it doesn't hit her how serious this is because this isn't HER family and that this was for a good cause. I have always thought of DH's family as my family too, I love each and every one of them. Yes, I agree, it is for a good cause, but again, why do we have to be the only ones contributing to this? It's her child and grandchild as well, why is she not able to help? She claims because she's on disability she can't afford it. Meanwhile, other BIL's say they are just fine about chipping in $50 to help out. But now I'm the asshole because I don't think it's fair that this should fall to us. DH is torn, because of course it's family. I sat down with him last night and we looked over our money situation and he can see that $200 is not going to happen, but $50 is doable. But he feels guilty because his mom is making him and me feel like shit for not giving more money.
If anyone has an advice I would really appreciate it. Although DH is standing up to his mother as much as he can, he's still struggling with this as well.
TL;DR: BIL's girlfriend is drug addict, need $400 for drug testing, MIL wants us to pony up the money to give him for it, but we can't because we're financially unable to.

Re: NBR - Frustrated... need advice
I am rarely in favor of loaning family money, and especially being guilted into doing so. This may sound harsh, but if your MIL is that insistent on making it happen, maybe she should pay?
There has to be another way to help your BIL and DN like occasional babysitting, taking over a home-cooked meal, offering to grocery shop for him, spending time with her at a park or movie, shopping, errands, etc. Maybe you could look for a charity or church that would help cover the testing fee? Maybe they could get on a payment plan?
Definitely a rough spot to be in, but you've gotta stick up for your family and what you can do financially. Is this a one time thing, or will there be more she/they will ask for in the future? Might need to put your foot down now.
Also, I don't understand this court system. They should pay for at least the first test. If it's positive it's up to them to continue testing or remove parental rights.
However, I also think that $400 is peanuts for the safety of your niece. I bet BIL owns something worth $400.
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I'm a big believer in never mixing family and money (without a contract). It's a slippery slope...tread lightly.
Edit to show I'm not mean: my husband and I pay for his grandmother's maid to come weekly, but we do so knowing (1) we won't get anything back in return and (2) we likely won't get a thank you. However, I consider that a "service," rather than us just loaning money.
Also found out that BIL did not ask for us to do this, this was all MIL's idea; BIL has no idea she was trying to organize this. He is not one to ask for things like this. That's not to say he won't appreciate the help, but I'm not really surprised that MIL was the one to start this whole mess.
I probably would have said, "I have to keep an eye on my finances so that I can pay for the things my child needs. Perhaps you should do the same." Because I'm a huge bitch. (Thank God I don't have a crazy MIL.)
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She called DH last night when he got home from work, again complaining and (he put her on speaker without her knowing) basically said that I was "strong arming" him into doing less or contributing less. God bless my man, he told her that it was a decision we had come to mutually, and she needed to stop assuming that anytime he disagrees with her that I somehow have manipulated him. He also phoned all of his siblings and explained our side, and sure enough she'd been going around telling everyone that I was a manipulative harpy who didn't care about BIL or DN. This is quite the turn in our relationship, we used to get along really really well. Apparently after I told her in no uncertain terms that her anti-vax ideas were not going to fly in our house, I'm the enemy.
Tell your MIL that you will contribute half, but can you borrow $150 from her? I would have a hard time keeping my cool with someone like that, and think you are handling it really really well. I get ragy on your behalf reading that. If she can't understand your need to put your family (as in you DH and baby) first, she is daft.
Charlotte born at 28w3d due to severe IUGR on 12.24.2012 Merry Christmas!
Missed M/C discovered 12.22.2014 at 8w1d measuring 6w3d
2015 was a year to test strength of both body and character, but it led us to this... BFP 01.26.2016 EDD 9.30.2016
Your MIL sound incredibly presumptuous, and I'm so glad to hear your DH is standing up for you and your family. The poor guy has to feel like he is stuck between a rock and a hard place.
Best of luck with the situation - would love to hear how it turns out (if you are comfortable telling) and I'll be praying that it all works out with your niece. That little girl deserves better than that.