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I faced a somewhat similar situation with my parents a few years ago. The only alternative that I could find to protect assets and still have Medicaid pick up nursing home costs was the following:

Put the lump sum into a variable annuity for Dad. Prior to mom going into a nursing home annuitize so dad begins receiving monthly income. Income of the community spouse (the one not in the nursing home) is exempt from being considered as an asset when Medicaid determines the ability of mom to pay for nursing home care herself. When mom's other assets are reduced to the Medicaid threshold level, the government starts picking up the tab.

If the annuity option chosen is a joint life expectancy of dad and one of the children, then payments will continue to the second annuitant after dad's death.

In our case, this strategy was overtaken by events before it was implemented. I am not a lawyer or an expert on these matters, by any means, but I did quite a bit of research at the time. I hope this helps. Good luck.

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