If you have your mother’s trust sell the assets and then transfer the cash to you, there will some taxable gain/loss for the change in value from her date of death to the date of sale. That is calculated on the trust return for her trust. Then the distribution of cash to you is not a taxable event. If you distribute cash that is larger than any net gain, you can then choose to pay any taxes due on your mother’s trust return or on your personal return (assuming her trust has language to allow that - which most do). If you do not distribute any cash to you, then her trust MUST pay any taxes. And lastly, if you distribute all of the cash and any other remaining assets to you so that you can file a final trust return, then any income must be taxed on your personal return. This is also the only way to benefit from any net losses in the account. Those net losses cannot be used on your return until the trust is closed and it’s final tax return is filed.
The other option would be for your mother’s trust to distribute the assets directly to you without selling them. In that setting, there would be no taxes due on the transfer, but you would then have a cost basis in those assets of their FMV (the stepped up value) as of the date of her passing. That is the same value the trust would use to calculate any gain or loss on sale. You would need to keep track of those values yourself as many brokerages struggle with this setting and can’t properly track the cost basis. This might be useful if there are some assets that have gone up significantly in value since her passing that you would like to continue to own.
Importantly, this is not an all or nothing decision. You can sell some assets and transfer others. It’s all up to you.
–Peter