Living Trusts and Medicaid
A Living Trust is usually created to avoid probate after death. Whether it's a good idea for everyone to have a Living Trust to avoid probate is the subject of another discussion, preferably with your Estate Attorney.
A Living Trust is revocable, meaning that if you create one you are not locked in to the terms of the trust. You can revoke the Trust, you or your named trustee can manage the Trust, and you can make changes to the Trust whenever you wish. The assets of the Living Trust are usually available to you to use as you please.
Because the money in the Trust is available to you to use as you wish, the Medicaid rules usually say this is an available asset you must use to pay for necessary care before you can qualify for Medicaid assistance.
The "government" will not go into your trust and take out the funds to pay for your care. If you are paying the cost of care privately, someone is going to have to write the check...this someone would be either the owner of the Trust, or someone legally appointed to manage the owner's funds.
Nor will Medicaid "take" your money to pay for nursing care. If you are receiving care in a nursing home, the nursing home must be paid. You are expected to write a check for your care until your resources have been "spent down" to the point where you will qualify for Medicaid assistance. You will then continue to pay what you can toward your care from your income, and Medicaid will pay the balance of your nursing home costs.
Please consult with an attorney experienced in Medicaid matters in your State before you try to do any "Medicaid Planning." As you can see, creating Trusts does not necessarily protect your assets from the costs of long-term care.