Ok - firstly, I am sorry you had to witness this and am very sorry you lost the kitten. RIP BB.

Let's look at this situation - small kitten rubs up against large dog, dog delivers a single fatal bite to the cat's head. I'm not seeing this as an intentional, deliberate killing at all. Sounds more like the dog was startled by the kitten's actions and lashed out of fear. Since the lab is 12, I wonder if her senses are impaired or if she has some sort of dementia which could lead to her being hypersensitive.

What was the dog doing at the time of the attack? Was she in proximity of a person, another animal, food, toys? There is ALWAYS a reason for a bite. Always. It may seem unprovoked to us, but it's not the case from the dog's POV.

When you keep a large dog with small animals, you are taking a chance in every situation. I have a multi-species household consisting of birds, cats and a large dog. I am fully aware that at any point my cats could kill my bird and my dog could kill my cats or my bird. It's very highly unlikely given the way I manage my animals, but things happen. You have to be comfortable with that risk when you put animals in that situation.

Glad you are considering rehoming the kitten. It's really the kindest option for everyone involved.

People forget that dogs are big, predatory animals with sharp teeth and that they know how to use them. We expect so much of them and they often live up to our high standards, but they can and often will kill things. It's disturbing and unsettling to witness, and very tragic in this kind of situation, but it happens, unfortunately.

And please don't be angry at your dog. It's not her fault and she shouldn't be punished for it.