John's will creates a credit shelter trust that equals the $1 million New York exclusion. He leaves the balance of his $10 million estate — or $9 million — to a trust for Abby that is eligible for the QTIP election (in other words, the qualified terminable interest trust is only for Abby, and she gets all the income: the election will postpone tax at John's death, and what remains of the trust at Abby's death will be taxable in her estate). John dies in 2013, and the New York credit shelter trust is created. His executor must decide whether to elect full, or only partial, QTIP treatment for Abby's $9 million trust. Issue 1: If John's executor elects QTIP treatment for the full $9 million trust, no New York tax will be payable (a good thing)...but if he does so, he's wasting the remaining 54.25 million of John's $5.25 million exclusion AND he's choosing something that wasn't necessary to postpone federal estate tax. Can John's executor still elect portability in this case? Issue 2: If John's executor makes a partial QTIP election of $4.75 million, he will shield the other part of the 59 million trust from federal estate tax using John's remaining $4.25 million of exclusion. Unfortunately, this $5.25 million taxable estate (John's $1 million New York credit shelter trust plus the $4.25 million non-QTIPPED portion of Abby's $9 million trust) will trigger at least $420,800 of New York tax, even though there's no federal estate tax. Not good. If John's executor elects QTIP for the full $9 million trust, and thereby doesn't incur New York tax, why might portability not be available? Several thoughts come to mind: when the IRS issued temporary regulations on portability on June 18, 2012 (T.D. 9596 77 FR 36150-36163), those regulations offered examples where portability was used when the deceased spouse's estate was under the exclusion amount. These examples showed both a full and partial QTIP election — elections that were unnecessary to reduce the deced