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Since you have to certify for Medicaid again later, the look back will apply to any gifting of the funds from selling the house. Consult an elder attorney familiar with Medicaid to make sure you don’t make mistakes.
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In general, the proceeds from selling the house would be expected to be used for his care, and the Medicaid would be suspended until the money was gone. But things are different when there is a community spouse. She has to have some place to live, and Medicaid's goal is not to impoverish the spouse.

Did your mother move into a facility, and is she now on Medicaid, too?

The house sale will have to be reported, of course, on the annual renewal form if not sooner.

There are a lot of articles about this subject on the internet. If you can find one specific to your state, that would probably be most helpful. Also look at the date. The more recent the more likely to be applicable.
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Is medicaid paying for him to be in the nursing home?

Why was the house sold and what was done with the money?

I'm afraid that your father in law will be penalized for selling the house.

You say "they sold their home" I assume this means that his wife is alive. Where is she living now that the house has been sold and he is in a nursing home?
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