The answer will depend on the law in your state. In Massachusetts, for example, the answer is yes, your mother-in-law can keep the rental properties and qualify for Medicaid. As you suggest, she would have to contribute the net rent after expenses to her cost of care. That’s the good news. There are, however, two caveats. First, the property would be subject to a lien so that the state would be reimbursed for its expenses from the sale of the properties either while your mother-in-law is alive or after her death. The reimbursement may be relatively small given that the Medicaid payment rate is usually lower than what nursing homes charge privately and her income will significantly defray the state’s cost. If your mother-in-law’s income is too high, it could create another issue, sometimes referred to as the "over-under" problem. If her income is less than the nursing home’s private rate, but more than what Medicaid pays, things can get really complicated. A local elder law attorney can advise you on how this is handled in Oklahoma. To find an attorney near you, go here: http://www.elderlawanswers.com/oklahoma-elder-law-attorneys.