We want to sell Mom's house and build another in our name. If she needs Medicaid will they look at this as income for her?

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My Husband and I live with Mom. She has dementia and we want to sell her house because it is too large & unsafe for her. We want to use the money to build a home that is good for all of us. She has long term care that we have not initiated yet, but it will help when she needs it. My worry is- If she outlives her long term care, will Medicaid look back at the sale of her house as income even though the new house is in my name? Also we will be using my sibling's inheritance to build a home suitable for my mother.Should I contact an estate Lawyer?

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How wise you are to be looking ahead! I'm going to sound like an echo of the earlier responses
1) See a lawyer. Small cost now could save big expenses later. The kind of lawyer should specialize in Elder Care.
2) As far as Medicaid is concerned, the proceeds of the sale of the house should be used for Mother's care. In a way, that what you are doing. Is it a way Medicaid will recognize? Would giving Mom a life estate in the house make a difference? These are the kinds of things your Elder Law attorney can answer.
3. The Medicaid lookback period is 5 years. If Mom doesn't need to apply until 6 years after the house sale, the sale is not part of the application. With her long term care insurance, would she have enough to last at least 5 years? More to discuss with lawyer.
4. There is no inheritance at this point. That will only happen (if it does) when Mom dies. Very few people with dementia and/or other expensive, long-lasting diseases can leave anything but mementos to their heirs. If Mom has to go on Medicaid there will definitely be no assets to divide, except the house if she still owned it -- and Medicaid would have a lien against it.
5) Let's consider a hypothetical scenario. Mom sells her house and keeps her funds to use for her own care. You build a suitable house on your own, with a mortgage. Mom pays you room and board and perhaps something for care. (That would certainly help with the mortgage.) She also uses her long term care insurance. But then her needs become greater. She moves into a suitable facility, and uses her LTC insurance and the funds from the house sale to pay for it. After a year her LTC runs out and the house money is gone. Now she applies for Medicaid. The house sale won't be an issue because she used it for her own care. And there will be no inheritance for anyone.

After you see a lawyer, I hope you will come back and share what you decide to do. This kind of issue comes up often, and we learn from each other!
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If you have provided necessary care for mom for two years often the house can become an exempt asset. But, since you want to build a new home, safer for her, it may be looked at differently. And the transfer of a home only will apply is if she moves to a nursing home, it does not apply to assisted living or memory care. Definitely, see and elder law attorney. How long will her long term care policy pay for a facility?
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Jann, chances are Medicaid would look at the paper trail and notice the equity from your Mom's house didn't stay long in her savings. Eventually they will find that the money was used to build a house for you, with your Mom staying there. Medicaid might consider that a gift, really big gift, and deduct that amount from any cost of care for your Mom should she need to move to a skilled nursing facility.

As Carla mentioned above, you need to see an Elder Law Attorney to see how to handle this.
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I think you should contact an Elder Law Attorney. I think Medicaid will definitely look at the proceeds from the house sale and ask where the money went. As far as using your sibling's inheritance, nobody is entitled to an inheritance until the owner dies, so I don't think your sister has any legal claim to the house or proceeds unless the sibling's name is on the title. That doesn't mean it won't create trouble or ill will within the family, though, if that's an issue.
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