I've been modeling and meditating on Mass. Estate Tax issues and here's what I conclude:

1. If the real estate trusts are denied, my total estate taxable assets are $3,949,880.00, which is below the Federal Estate tax threshold.  The Massachusetts estate tax will be $278,148.48.  Since total liquid assets in my estate are $1,222,112.46, after paying the estate tax, you would have a net liquid inheritance of $943,965.00.  In the future, when the real estate in the trusts was sold, capital gains taxes, if any, would be based on the value of the real estate at the time of my death.

2. If real estate trusts are allowed, the total estate taxable assets are $1,253,630.00 on which there is no Federal Estate tax.  The Massachusetts estate tax will be $4036.  If then after 20 years (which is your life expectancy) the real estate in the trusts were sold, there would be (at the 25.1% rate) $616,305. long term capital gains taxes, creating an hypothetical estate plus capital gains tax burden of $612,269.  The net estate tax of $277,240 saved by the Trust would have to be compounded for 20 years at a rate of 4.08% annually to balance the future long term capital gains tax burden.

In the long term, disallowance of the trust transfers might actually be financially advantageous.  I would consider presenting all the data to the Dept of Revenue, with a check for $278,148.48, and ask that they return the excess over $4036 if they find the transfers in trust valid.

I hope that you are comfortable and well.