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Another problem/idea is that she does not want to leave the money in her name but put it in my or my sisters name. She is affraid that if something happens to her, like being hospitalize, that they will take her money if she can't pay the bills. Can this be done legally, and can it be done where she can still draw out of it for living expenses?

You might want to look into a "revocable living trust." She creates a trust and designates herself as executor (is that the right word?) and then names backup executors (like you or your sister) to take control if she becomes incapacitated. A trust of this type also helps you avoid probate taxes when her estate transfers to you and your sister (or whoever). To set up the trust, usually done with an estate-planning-type lawyer, she just changes ownership of her accounts from herself to her trust, and then the lawyer funds the trust by actually transferring what's in the accounts.

That's a layperson's explanation. I think it's worth doing some research and checking into lawyers and costs.
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