Yes, the new home can also be held as a life estate. Buying a new life estate has no immediate effect on capital gains. The purchase of the new house has no effect on any capital gains that may be due on the sale of the existing house. However, it may affect the capital gains on the sale of the new house. Typically, at your mother’s death the basis in the property would be adjusted to its value at that time, a so called “step up” in basis. If the property is purchased as a life estate with the remainder owners contributing their fair share of the purchase price the life estate is not created by gift and may not be entitled to a step up in basis at the time of your mother's death. On the other hand, the basis will be the new purchase price rather than that paid by your mother when she bought her current house, so the capital gains should be lower. For more information about capital gains, click here.
For information on life estates, click here.