Note that I am not licensed to practice in your state.
The federal gift tax exclusion for any given year is $12,000 per person. In your question, you did not say what kind of trust the home was placed in and if your mother was also a trustee. So for the purpose of this answer, I will ignore the existence of the trust. When your mom sells the house and comes to live with you, she can start paying you for your services as a caretaker. In that way, the money she gives you is not considered a gift and will not have a limit of $12,000. However, it is not reasonable that your instant sallary as a caretaker is $70,000. So it would probably be best for her to pay you at a reasonable rate and then you can take that money to off-set your mortgage.
If you have siblings or if your mother has other potential heirs, I would be very careful in documenting where the money is going and try to have everything in writing. You do not want to be placed in a situation after your mother's death where your siblings or other beneficiaries come after you for the money because they think you manipulated your mother for your own financial gain.
There are several different issues here. To be safe, you should contact an attorney in your state.
If your mother is mentally competent, once her house sells, she can give a portion of the money to you to pay off your mortgage if that is her wish. The annual allowance is not a limit on gifts, it is a limit on gifts that are not federally taxable. So long as she is mentally competent, she can do whatever she wants with her asssets. Also, it is $12,000 PER PERSON PER YEAR. So, if you are married, she can give you and your wife $12,000 EACH on December 30, and another $12,000 to EACH of you on Jan. 2. That would pass $48,000 tax free.
However, another issue is the SSI and Medicaid rules. These are governmetn programs for people who have no assets. They provide income, nursing homes, medical care, etc. to elderly people who do not have the means to pay their own way. They have very strict rules that do not allow elderly people to give away their assets in order to qualify for Medicaid and/or SSI, with a 5 year look back window, other than for certain exceptions, which vary by state. If there is any chance your mother might eventually need Medicaid or SSI benefits, or to be institutionalized, you risk jeopardizing her eligibility if she gives away her house sale proceeds.
Please speak to a local attorney.
First, the quick answer: The annual gift tax exclusion for 2008 is 12,000. per person. However, in 2009 the amount adjusts to $13,000. If you are married, your mother could give each of you $12,000 for a total of $24,000 before the end of this year. Then, in January she could gift another $26,000. Furthermore, your mother has a $1,000,000.00 million dollar lifetime exemption so she can give you the balance, file a gift tax return, use the little bit of her 1 million dollar exemption needed to cover the difference, and she would owe no tax.
On the more complicated issue of medicaid, your state law might permit her to enter into a care agreement with you.