An attorney who offered me a cheap probate package suggested that if I
went to the complication of a living trust, that this would affect the
cost-basis of the house when I sold it. This meant, I understood,
someone who bought the house would have to pay more in property tax
because it would asses for $300,000 though it sold for $500,000.

Since everyone in the family wants to make sure everything is done
properly, I've now seen, and paid, two other lawyers about the trials
ahead. One of them was adamant to go ahead with the living trust
because of the state administration of federal Medicare, which is
basically a loan program for health care, though many don't seem to
know this. Most of the things a living trust would do, however, I am
finding can be handled other ways, without giving the impression of
"hiding" money to qualify for a loan my mother would have no intention
of paying back.

For instance, there is a program within Medicare in which a child who
takes care of a parent for two years can have the house exempted from
asset transfer. http://www.njelderlaw.com/news_pdf/sept_2002/Child.PDF
This assumes my mother loses all of her money to health care costs.
Incidentally, there is also a provision in California's Medicare rules
(Manual from 1989, p26, top of page) not to seize a house if the
chldren will become indigent in the process.

Since our governor, Arnold Schwarzenneger, is concerned about folks
who are baldly hiding assets, there are rumors of some laws above
being changed and people wanting to be on the right side of the
calendar for "grandfathering." I am just trying to allow for Medicaid
while hoping that if "cost basis" enhances the house's value, I don't
screw it up.

Banks seem to like living trusts, because very little is done to
support powers of attorney, for instance. And reassessment seems to
loom large, because there is also a special law on the books in
California -- I think prop 64 -- that allows transfers to children
without reassessment.

Am I wrong about cost-basis and living trusts? Is there a living trust
route -- that can include my caregiver transfer of assets?

This isn't rocket science -- extra tip for getting someone from
Schwarzenneger's office to read this.

One question I will probably ask as a follow-up: are living trusts
pretty much all (in California) the same?