No comment on the $50K check suggestion...

The facts given weren't 100% clear, but with the "life estate retention" and the attorney's opinion that the Daughter is the "sole settlor", it could just be that the Mother had transferred the property to the Daughter's, and the property was held under the Daughter's Revocable Trust.  

If so, upon the Mother's death, the life estate terminated and Daughter continued to be the owner of the house, with the title under her (the Daughter's) Revocable Trust.

If the above were the facts, I would agree - NO stepped up basis. 

Further, the daughter may even have a capital gain because her basis (assumed fact: the transfer was a gift from the mother) could very well be the lower of the FMV at the transfer or the Mother's basis.  Check the basis rules for gifts.   

Regardless, it's time for my daily bourbon regimen.  And I digress.