Short answer: Because the financial advisor did not have a Court Order to do what he did when he liquidated the investment account and put the proceeds in a trust account.
As others have said, whoever holds an asset when it appreciates has an obligation to pay the capital gains tax, and the gain occurred between the date of death and the end of probate, which is not over yet. My dilemma now is whether I should point this out to the attorney for the Trust.
Long answer: Despite the lie from the financial advisor who set everything up, then hid it from me (the attorney-in-fact by durable general power of attorney), that all 7 accounts were "TOD to the Trust", three were not, including the investment account I'm talking about. All of them had to go to Probate, and move to the Trust via the Pour-Over Will, by order of the Probate Court. So far, the lie of the original financial advisor, forcing Probate after he set up the plan to avoid it, has delayed distributions to the beneficiaries 20 months and cost over $25,000.
That includes the investment account I'm talking about, Probate is not settled, and there has been no Court Order for any Probate funds to go to the Trust.
The Personal Representative, who did not wish to get any input from me even though I had been working with the financial institution, the attorney for the financial institution, the advisor, other employees, and each of the seven accounts, daily, for about two years, apparently could not get the institution to retitle the investment account to his Probate Estate account. The financial institution refused to do anything the PR asked for, and I worked through my attorney (for the Trust) to explain who to work with at the financial institution. The last I heard is that the financial institution was not going to let the PR deposit what's coming out of Probate into a Trust account, so I gave him, via my attorney for the Trust, deposit slips to do that in person.
It seems the PR rubbed the right people the wrong way, and they refused to work with him.