I am so sorry for your recent loss. Right now the money is in your grandmother's estate. Your mother likely has an interest, but nobody knows that until the will is admitted to probate. This is not an instantaneous process, it takes time.
If your mother is able to pay her nursing care bills then yes Medicaid will want to get paid, but your mother still has no money to pay so long as your grandmother's funds are in your grandmother's estate.
Your mother really, really needs to discuss this with a well regarded local trust and estate attorney. This simply is not something that can be explained, let alone solved, on the internet.
Hope this helps. Elizabeth Powell
There are two strategies that you might try to explore with an elder law attorney or with an estate planning and estate administration attorney. First, is it possible to place some of this money (perhaps one-half or more) in a "special needs trust" or "supplemental needs trust", perhaps with court approval from the court that has jurisdiction of decedent's estates in your county and state?. This might be one way to protect at least part of the monies in your grand-mother's estate so that all of the monies are not expended on nursing home care. A special needs or supplemental needs trust holds the monies for your mother for all purposes except for items which are paid for by the federal or state government progams such as nursing home residential Medicaid. An understanding judge may authorize some of this money to be placed in such a trust. A second alternative is a disclaimer of all or part of this inheritance (a refusal to accept assets from a person who has died )which must be signed and filed with the same court by your mother or someone acting on her behalf under a power of attorney or again by court approval. A disclaimer of an inheritance or a portion of an inheritance must be filed within 9 months of your grand-mother's death. You should explore each of these possible stategies with a knowledgeable elder law or estate planning attorney; we cannot be sure that either of these stategies will work but they should be considered as possiblities at least as to a portion of these sssets.
If the probate of your grandmother is in Washington it may be possible to use the Washington Trust and Estates Dispute Resolution Act (TEDRA) statute to establish a special needs trust (even though one was not set up in the will) if all of the interested parties to your grandmother's estate can agree. This is definitely something to discuss with an elder law and probate attorney as the benefits will far outweigh the cost.
Attorney at Law
I am writing separately to correct a couple of misconceptions contained in other answers.
First, Medicaid won't take any of the money. However, it is true that when your mother receives the inheritance from her mother's estate, then she will have more than $2000.00, and she will no longer be eligible for Medicaid. At that point, she will be a "private pay" patient and will have to pay for her care in whatever care setting is most appropriate.
I understand that the outcome feels like Medicaid "took" the money. But technically, it is just a matter of whether your mother is eligible.
Second, some references have been made to the possibility that a TEDRA agreement could be used to "re-form" your grandmother's Will to create a Special Needs Trust for your mother. While this may be technically possible to do if all interested parties are in agreement, the resulting Special Needs Trust will not satisfy the requirements to keep your mother qualified for Medicaid unless your mother's age is under 65. If she is under age 65, then I recommend that you immediately contact Sean Bleck in Seattle at 206-230-2200 to investigate this wonderful possible opportunity to protect your mother's inheritance, and preserve her eligibility for Medicaid.
Third, some reference has been made to the possibility of using a "disclaimer" by which your mother would essentially refuse to accept the inheritance. In Washington (and I think everywhere under current federal law), such a disclaimer would constitute a "transfer" of a resource which would incur a Medicaid transfer penalty that would preclude your mother's eligibility for Medicaid for up to 5 years after the date of the transfer. So I don't think a disclaimer should be considered.
Two planning possibilities:
1. Obviously, everyone now understands why it would have been preferable for your grandmother to revise her Will to leave your mother's share of the estate in a Special Needs Trust for your mother's benefit. That would have accomplished everything that we are now trying to accomplish with much less risk and expense. But I add this only to encourage you to let others know about the need to review their estate planning arrangements with an estate planning or Elder Law attorney.
2. If your mother is over age 65, and the Special Needs Trust cannot be feasibly created for her benefit, then I would suggest that your mother consider two gifting strategies by which she might be able to protect some of the inheritance that she will receive. Both will incur a Medicaid transfer penalty, and both will require that she have confidence that her children (or whoever she makes the gifts to) will use the gifted funds to provide for her care during the applicable Medicaid transfer penalty period. These strategies are highly technical and are specific to Washington law. Your mother would need to discuss these strategies with a qualified Elder Law attorney who regularly practices in the field of Medicaid planning in the State of Washington. But in view of the substantial amount of the inheritance that she will receive, she ought to consider these potential strategies.