Fund a trust, then borrow from it.

The transfer of the $110k to the irrevocable trust would most likely be deemed a disqualifying transfer, such that if she applies for Medicaid within 5 years she would face a very long penalty period. Is your plan to have her not apply until after the expiration of the lookback period?

In any event, the loan by the trust to the client should qualify as a legitimate loan, since its terms meet the minimum requirements of interest payments and it’s secured by the house mortgage.

I don’t see how you have allowed for upkeep of the house, though, if the client is in the nursing home.

If your goal is to wait out the 5-year lookback period and are only concerned with defeating the state’s recoupment claim against the client’s estate following her death, then this should work fine.

In general, it is indeed a good idea for anyone lending money to a potential Medicaid applicant to secure the loan against the house, and then record that in the register of deeds. That’s so that the secured lender can be paid back first–i.e., before the state–upon the Medicaid recipient’s death.

On her death, the state can make a claim against her