Given the unique situation you describe here, I believe you need when your father passes, to obtain the advice of an attorney well versed in the medicaid laws of your state and get their help to settle his estate. While the spouse has a life estate on a house before medicaid puts a lien on it, and when they pass away Medicaid might want to call in this asset, and while there is a five year look back on all tranferred assets, and all those general truths about how medicaid for nursing home care works, there seem to be some unusual variables in the situation here. You folks need to get some really good advice on this. According to what it used to be in my memory, medicaid could not take a home if there was a handicapped child, a blind or totally disabled person whose residence it was, say if the medicaid recipient had a disabled adult child living there. And in this case, as you say, the child is a medicaid recipient too.
And what your father did, transferring the title out of her name...it may have been okay. Hard to say. In some states, it would've been the thing to do.That's why I'm suggesting you consult a professional to look at this individual cases and work it out with the medicaid system. It's not 100% certain that right now they're going to re-look at the situation and take back mother's eligibility because of that real estate transfer...that would be very unproductive for the facility she's in to get their money, which is the entire goal of this whole program anyhow.
It doesn't matter whether anyone was "totally honest" when declaring the mother's assets for Medicaid purposes. Because they have access to all sorts or records, including real estate transfers. No one believes that people applying for assistance would be totally honest, so everything you can imagine cross checks and matches with all sorts of records. You have to have your mother recertified periodically, and this whole issue, her spouse dying, is going to come up promptly anyhow. It makes absolutely no sense to just try to postpone the issue until they come after you.
When he dies, do not be stupid. Probate the estate, get good legal advice. Do this right. It will pay off in the long run. I have seen a case where both spouses who owned the house were on Medicaid, in a care facility, and the disabled adult child got to stay in the house until HE passed away some years later without it being taken by the program. Then it was sold and the profits went to the heirs. Medicaid never got any money back for that particular house.
