Mom is on Medicaid and has an Income Cap Trust Fund. What can we legally spend her money on?

This is a bit confusing. Since Medicaid is a joint effort between states and the Federal government, you really should check with someone who knows Medicaid in Oregon. If the department itself is giving you confusing information (can't have her toenails cut???), then you may want to talk with a knowledgeable elder law attorney. I know this would cost some money (of yours), but one session may do it and then you'd know what is legal. The idea her money can be spent for grandchildren's gifts but not her own health care doesn't make sense.
Good luck. Medicaid can be confusing.
Carol

Well, I am confused, too. It can't be used to pay for having her taxes done? Huh? (On the other hand, if he is on Medicaid are her taxes too complicated to be done by one of the free services for the elderly?)

Do you mean that her assets exceed the max and you have to spend the excess on her behalf? Or are you talking about what you can buy for her from your own money?

I know that Medicare pays for a podiatrist once every 6 months. Mom had one that came to her home. I would imagine it's the same for Medicaid.

How closely does Medicaid monitor her income? Do they ask for monthly or yearly reports? I cannot imagine that paying for small things that are directly for your Mom would be such a big deal. Here is an article from this site: https://www.agingcare.com/articles/Spending-Down-to-Medicaid-133289.htm

Btw, if she is on Medicaid, and meets their income limit, she should not have to pay taxes at all. Talk to an accountant or go to the IRS.gov site: http://www.irs.gov/individuals/article/0,,id=96623,00.html

The link above is titled: "Do You Need to File a Federal Income Tax Return?" on the IRS.gov website. I'll try the link again:

http://www.irs.gov/individuals/article/0,,id=96623,00.html

Carol is right, none of this makes sense. I have found that each state interprets Medicaid care differently. Also, you will get a different answer, depending on who you ask. It is tiring. One good resource are social workers at your local hospital and in-home care nuses because they work directly with clients are really know the ins and outs.
good luck