Mutual funds, like other assets, can be stepped up upon death, if they are eligible. The eligibility is the key. For mutual funds in particular, the step up would be to the closing price for the fund on the date of death, which may or may not be the NAV.
Generally assets held in a trust are eligible for a step up in basis as long as the value of the trust is included in the decedent’s estate. So if the value of the trust was included in your mother’s estate, then the assets in the trust should be eligible for a step up. If the value of the trust was not included in your mother’s estate, then the assets would not be eligible for a step up. Generally, non-inclusion in an estate only happens for irrevocable trusts, but there are some revocable trusts that become irrevocable upon death of the owner, and may not be included in the estate.
Depends on whether the assets have a step up in basis and if you want to keep those particular funds.
AJ