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*Using a trust to protect assets yet qualify for Medicaid
*Avoiding estate recovery (when the state files a claim for reimbursement of their Medicaid payments after the recipient dies)
*Protecting the house and other assets
There are too many issues and variables for me to discuss here. I think at this point it would be really beneficial for you to read my book, which covers all of these! "How to Protect Your Family's Assets from Devastating Nursing Home Costs: Medicaid Secrets" (www.MedicaidSecrets.com)
Good luck with everything!
The state can recover costs from any assets existing when the recipient dies. That is typically a house. So, no, I don't think a lien on the house can serve as a way to cover penalties.
Are you living in your mother's house? Have you been caring for her for two years or more?
Assets have to be spent down to be under the allowed limit. Paying bills is a valid way to spend down.
I think your best bet is to consult an attorney specializing in Elder Law. Doing what needs to be done correctly to minimize any penalties and get Mother eligible for Medicaid as soon as possible will be worth the lawyer fees.