Long Term Care Funding

I'm not sure I understand the question fully.

Is the person already in long term care (or about to go in) or are you considering a potential situation in the future? (it makes a difference).

Has the house already been sold?
Are you talking about a straight house sale or some sort of equity release scheme?

I would have thought there is no reason why it can't be done by power of attourney.

I am assuming that no-one else lives in the house.

It would seem to me that the simplest way would be to sell the house, invest the cash somewhere and pay the fees (you don't have an alternative about paying if she has assets unfortunately).

Personally I would put the money in a top paying cash account like ING direct or cahoot.
You need access to some of the money and I personally wouldn't want to tie it up at her age.
However you might want to discuss investment options with an IFA (bear in mind they have a vested interest to sell you something though).
Try and find one recommended by a friend, colleague or family member if you can.

Personally I would also try and sell the house as quickly as possible (cutting the price a bit if necessary).
Recent surveys are showing house prices are falling so you might be better off cutting the price a bit now to shift it rather than hanging around waiting for a good price whilst prices good down, at which point you will have to drop your price to follow them downwards.

A local estate agent should be able to advice you on the situation in your area, but in general the market has turned and it will become harder to sell houses and prices will drop in general.