Regarding taxes on the inherited retirement plan, typically your options should have been: roll it to an inherited IRA or lump sum to you as beneficiary.
If you roll it over into an inherited IRA, you will begin taking RMD's (required minimum distributions) over your lifetime since you are currently 71. Federal and
State Taxes are based upon the amount of RMD which is added to your income tax as ordinary income. You can request a % to be withheld for taxes from the bank or brokerage firm when you set up your RMD.
You can withdraw as much as you wish over and above the RMD amount each year to distribute to your children. Any distributions will be considered ordinary income in the tax year in which you request it.
If you request a lump sum, then the full amount of the retirement plan balance is given to you. The company may ask you how much you want withheld, or will automatically take a percent (maybe 25%) for Federal taxes. This full amount of retirement plan balance will be added to your Federal &
State taxes as ordinary income in the year of distribution. Any amount of taxes withheld will be credited toward your Federal tax payment. You can then freely distribute the funds to your children.
PS-no one named on her retrement acct.
Since you are the beneficiary as stated, all taxes become yours to pay on the inheritance.
As to inheritance tax, I will leave that to those who know that area better.