Medicaid penalty. Any advice?

As Jessie Belle & Babalou have said, she should be OK if she spent the $ on her care. I'd like to suggest that maybe 5 months before $ runs out, you have a talk with the social worker at the AL as to what mom's anticipated needs could be. It may be that mom will be better off at a NH and if so you want to apply for NH Medicaid rather than for AL Medicaid which is paid on a Medicaid waiver program. Ask the social worker if the AL has a sister facility that is a NH or where other AL residents have transitioned to once they are beyond what this AL does that take Medicaid.

It may be the mom could be OK medically for NH level care right now and could do her final spend down as private pay for a couple of months @ the NH then stay as a "Medicaid Pending" resident.

Talk to the social worker at the facility about your concerns. As long as the inheritance is being spent on mom's care, I don't think there will be a problem. The problem arises when monies that belong to the elder are "gifted" to others.

I'm not comprehending your question very well. When your mother received the inheritance she probably lost Medicaid benefits until the money from the inheritance was spent. Is that correct? When the money has been used for her care, she can reapply for Medicaid if she needs to. If it was spent correctly there shouldn't be a penalty. What penalty are you concerned about?