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My mother has to keep her checking account under $2,000.00 which usually is not a problem. She does use that money to purchase personal items.

Can she write checks to her grandchildren and greatgrandchildren for birthdays, etc.

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Check with your state Medicaid people. I believe she can do what she wants with the money, as long as it is not more than they allow her to have. I would, however, make sure there are good records, just in case. But please do check locally, as states vary as far as the rules go. You don't want to be worried about repercussions down the road.
Good luck,
Carol
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