Taxes on inheritance

[Sam Yi]

I'm posting this in the Investing area since I feel investors will be more knowledgeable about tax implications.

I'm trying to sell a family member's (my aunt) house in Queens, NY and convert it into a cash flowing property to fund her "retirement". The house is worth approximately $800k+ and is fully paid off. She bought it for less than $200k back in the 80s. She's planning on leaving the house to her nieces and nephews. Since she's not married, she'll only be able to shelter $250k of the gain right? If we don't want to realize this gain and pay taxes on the $800k - $200k (purchase price) - $250k (deduction) = $350k, would it make sense to cash out refinance? She has minimal income and will not qualify for refi. We were hoping to reinvest the money into a cash flowing apartment complex (small) and put everything into a living trust. Can someone advise? We are just looking at feasibility at this point... once we decide to move forward, we'll hire a good tax attorney for assistance.