If the trust is set up for the child and the child is the only named beneficairy I suspect Mom is wrong in the way she addresses reporting of trust income for tax purposes--and may be wrong on other points as well. If the trust also includes Mom as a beneficiary--the answer will vary.......and the instructions do address multiple beneficairy issues--not very well in my opinion.
The FAFSA instructions as to how to address trusts begin about question 43. And in general a trust is fully included. ( Private institutions can ask harder and dig deeper.) If your post is correct, this is a trust for the kid and contains no court ordered restrictions--then the full asset and income is reported at kids level--even if there are other access restriction of donors making.
Essentailly this is the WORST of both worlds for aid--as to income and as to assets.
There is a curious quirk in the reporting instructions that says if there is a court ordered restriction the trust need not be reported --it is my read that in some cases a trustee has gone back into a friendly court to get some sort of restriction applied to the trust--I don't have particulars.
Depending on the size of the trust it might be possible to convert all assets to a UTMA/529 thus making it off the count under current FAFSA rules-but my view is not mainstream and you darn better review it with trust counsel--also, if you park a lot of money in a 529 long term that isn't needed due to scholarships there are some exit penalities--but these penalities apply just to the income component--they may be "small" compared to the cost of having a naked trust "offset" 35% on assets and up to 100% on income against aid.
If Mom incorrectly reports the trust as her asset and her income--the aid effect is much less--but to supply an incorrect answer is not a good practice--the "audit rate" I read on aid applications is much higher than for ones tax returns. If ones incorrect 1040 and 1041 matches ones incorrect FAFSA it may not go beyond that--but it doesn't make it right. I think it would be a safer higher moral road to review with counsel if there are other ways to make the trust be off the count.