We see it all the time from practitioners of hillbilly probate.  Whenever the story starts with "someone told her," you know there is not going to be a happy ending.  When you write "the spirit was met," a better way to say it would be "substance over form."  Did Mom continue to make all the payments on the house -- taxes, insurance, maintenance, mortgage if there was one?  That shows substance. 

Whenever the story doesn't include "before the sale the family asked us how to avoid potential tax consequences," you know there is not going to be a happy ending.  The kids signed the deed, and asked no questions.  The kids cashed the checks, and asked no questions.  (Did they deposit the funds in Mom's bank account?)  When they received the 1099-S, did they then issue a nominee 1099-S to Mom?