Thank you for your question.
Per the terms of Medicaid, any payments made for nursing home care during her life can be recovered from the deceased's estate.
It is the responsibility of the executor/executrix of the estate to properly handle the funds of the estate. If the funds have been improperly paid out to beneficiaries, the KanKare program (which administers the Medicaid in that state) can sue the estate and its executor for recovery of funds if it has reason to believe that funds have been misappropriated.
Prior to your mother taking advantage of Medicaid, she would have had to revealed all her assets to the KanKare program, so they know what she had prior to passing. Most likely, this would have been exempt assets, such as her personal home, that were illiquid or otherwise exempt from the asset spend-down required by Medicaid.
The asset recovery from the Estate is standard operating procedure for this type of program.
Insurance proceeds from the death of another family member that were paid directly to your mother would have been NON-Exempt assets and would be expected to be recoverable in this case. If you properly used the money to pay for nursing home costs from this lump sum, you should be able to present proof of payment to follow the money to show that it was used for its required purpose.
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