Do I need a trust set up for my parents insurance policies as those are the only assets they have?

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Pawpaw hiker - yeah, that's true.
When I did my mom's Medicaid application we had a glitch with her $1,000 face value term life insurance! It was old from the 60’s when policies were 20 – 30 pages, so you had to read through it for the word term. The Medicaid worker doesn’t have time for level of detail so couldn’t check whole or term but could check information not provided. So I get a letter requesting this info asap (48 hrs). I got a stockbroker, who holds TX insurance license, to do a letter that the policy was term and faxed it to HHS. Had a couple of other issues. Yeah the Medicaid application is being scrutinized.

If there is any cash value in the insurance it will need to be taken out and used for their care or their assets before Medicaid pays. Everything has to be NCV - like their funeral home policy too.

imho the only thing that gets around scrutiny is oil & gas lease low % revenues as so many of those only pay every decade or so so they don't show up.
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Are you are considering a trust as a means of protecting their life insurance policies from Medicaid? If so you need to consider how soon they may need to qualify for Medicaid. Medicaid has a 5-year look back period. If you set up a trust now & have the ownership/beneficiary changes to the trust & your parents need to go on Medicaid in 4 years, Medicaid may still require that you cash in the policies & turn the money over to Medicaid.
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Just out of curiosity, why a trust?

This really is going to be dependent on what type of policies they actually are: term, whole life or perhaps an insurance policy that actually is an annuity.

Whatever the case, you should sit down and try to read the actual policy to get some sort of knowledge of what the policy is and does. Some policies have big and significant costs to change; some have hefty tax consequences when you do change it (a 1035 Exchange). You likely will need to work with someone with expertise - like a real stockbroker who also has an insurance license (someone with a Series 7 license and with a true brokerage house); or an estate planning attorney. Look 4 ones with office in the county in which your parents live.

One thing to think about is how is the trust to be funded?
And what do you need the trust to do?
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