1. No, you will not be expected to continue to pay for your mother after she is on Medicaid. You are not legally obligated to do so.
2. No, you will not be penalized for taking your mother as a tax deduction.
3. If your mother’s rental payments did not exceed the fair market value of what she received in return (i.e., she paid the “going rate” for the rental) then she did not make any gifts to your sister and Medicaid cannot penalize your mother when she later applies for Medicaid (and your sister will not have to pay it back).
