If my mother transfers her assets to a living trust with herself as the trustee, does she still pay the taxes on those assets?

It appears that you have two questions. First, the trustee/beneficiary of a revocable living trust pays taxes on the earnings of the assets in the trust just as if she held them directly.  When she dies, the trust becomes irrevocable and the trust pays the taxes (at compressed brackets and so higher rates). Second, it appears that you do qualify for Medicare home health care if you need nursing, physical or speech and language therapy.  Please talk with your doctor.  Your state might also have a Medicaid waiver program for which you qualify.  You can discuss this with your local Area Agency on Aging or with an elder lawyer.  To find an elder lawyer near you, see the website of the National Academy of Elder Law Attorneys (www.naela.org).