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I had borrowed money from my mom and she took it out of her IRA. I paid her back in full but now she has this money sitting in her account. This was two years ago so it is too late to pay back to the IRA without penalty. However since now I am considering nursing home and the 5 year look back and since I borrowed this money and it should be in her account..I am wondering if I could just transfer the money back in without the 5 year look back penalizing her for the transfer of money. Does anyone know if that is a possibility?

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I agree with Barb. Doesn't matter where the money is it will all need to be spent down.

I just have one thing to say about the IRA. An IRA is differed income. Meaning taxes are paid when its cashed out. When Mom withdrew money, it became income and she should have claimed that on her taxes. If IRAs are not cashed in by the age of 70 1/2 years then taxes need to be paid to the IRS. We set this up with our financial guy and a 1099 is received every year for the taxes owed since we don't want to cash them in now.

We don't have 401ks but they too are deferred money. Taxes are due, I would think, for whatever you pull out yearly. I think with the IRA and 401k I would consult with a CPA how cashing them in would effect taxes due. Will Medicaid allow for money to be set aside to pay IRS and state taxes? Pretty sure someone on the forum, like igloo, will know more than me.
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Monies that are in an IRA are a countable asset that will have to be spent down before mom can apply for Medicaid. I don't think it much matters where the money is as long as it is in mom's account. Make sure you have proof that you paid her back.
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I think you need expert advice on this, an Elder Law Attorney in your state, for instance. All States have their own rules, and the Medicaid program is administered by individual states ALONG WITH the federal government. This is something you cannot afford to do wrong, if it can be prevented. Please seek the advice of an attorney. An hour will cost you 350.00 in all likelihood, money well spent not to make a mistake in this.
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