Jim;   <<The whole idea of putting the children on the deed looking back looks like it was a big mistake.>>

People put kids on the deed;  transfer;  assets for a whole lot of reasons that make sense at that time.... 

5 year Medicaid lookback is one of the bigger reasons people try to protect (their parents money).. 

If circumstances were different and mom ended up in a nursing home, or had a gambling habit, or whatever...

Good bad or otherwise, the decision came with tax consequence.  End of story.  Don't feel bad, just let em know what they owe.