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Right now she is paying her own nursing home expenses, but eventually her money will run out. When that happens we will sell her house to keep paying her expenses. Will Medicaid look back and penalize her because of the expenses of keeping the house while she did not live there? (taxes, insurance, utilities)

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You might also want to do a break-even analysis, to determine when the cost of maintaining an empty home will exceed what could be gained from an investment, say in low risk mutuals or even no-risk CDs (although they're not paying much). ...Unless the house is going to be rented out.

Remember that insurers do not look kindly on being asked to insure a vacant house, and if they do, it will cost more for coverage. And an empty house does deteriorate a bit even if it's not lived in constantly.

So you or your mother would be paying out expenses on the house while she's in the NH, until the house needs to be sold. What's the real estate market like for her home now? If it's good and the house is sold now, that's income now to be invested and no maintenance or obligations for someone to take care of the house - lawn, snow removal, cleaning, repair, etc.
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Medicaid will not penalize her for property upkeep as long as there are receipts to prove that is what it was actually for. Follow igloo's good advice.
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Mom should be able to do her spend -down on her care or her property. You want to make sure checks written are to the providers business - like Garcia Plumbing rather than Joe Garcia, otherwise it can look like gifting. Do not pay and then have mom reinburse you if at all possible as it looks like gifting.

While mom is private pay, she can spend her $$ to get a face lift or get new appliances - now whether that the best way to spend $$ is another issue.

If plan agreed upon is to sell, if it's not listed right now, why a wait?
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That's a good question. Your best bet is to contact an Elder Law Attorney in the State where your Mother lives. The Attorney would know the rules and regulations for that State.... every State is different. Let us know what you find out.
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