"You're in a bad place."
That's how the lawyer summarized our situation, with regards to saving for future needs of our four-year-old daughter, who has diagnoses of autism and linear nevus sebaceous syndrome.
We have two daughters. For each of them, as soon as she entered the world, we started saving for their future higher education needs, with our state's 529 educational savings plan, a nice tax-exempt way to be saving and planning ahead.
The first daughter, now age 7, is a very good bet for higher education. Loves school, reads well above grade level, yada yada, insert effusive parental-brag here.
The second daughter at age 4 speaks almost no words, though she has been up to 80 words at two different points. There are a whole slew of other milestones missed and delays documented. We're convinced she's got some serious smarts underneath all her sensory needs and other challenges. But at this point, her educational trajectory is in some doubt.
Follow me over the jump for the rest of the story, and the newly-introduced legislation that does exactly what we need...
So, as our younger daughter gets closer to entering the school system and yet keeps regressing away her various gains, we started to wonder about the wisdom of the 529 account for her. The rules of the 529 are clear: you can only use it for higher education expenses.
Our little one is obviously going to have some needs beyond the norm as she matures. Those needs may have to do with higher education, but they may not! We don't want our savings for her to be locked into something that's not flexible enough to meet her needs.
That's the situation that sent us to the attorney, to ask about the potential of a special needs trust.
That's the situation he shook his head at, and called "a bad place."
The thing is, a special needs trust isn't designed to be a setup for you and other relatives to sock money away incrementally, like the 529 for higher education. The special needs trust is a vehicle where you move a big chunk of change for the later support of a disabled person, and it's highly hemmed around with restrictions to keep unscrupulous folks from using it as a tax shelter when disability isn't really the issue. You need to be very sure you've got an ongoing disability situation before you start down the special needs trust road.
But the 529 isn't a great bet for our daughter either, given the uncertainty of her situation. The attorney didn't know what to advise us, except that there weren't any REALLY good options for us.
We were told that federal legislation had been introduced in the past, to create a vehicle similar to the 529 but for expenses related to disability. But it had never managed to go anywhere...
Except that there's been a big ol' election between then and now! Elections have consequences, maybe even?
Here's our chance! The legislation has been introduced again, both in the House and Senate, on February 26, 2009. It's called The ABLE Accounts Act of 2009 (ABLE stands for Achieving a Better Life Experience), and the bill numbers are H.R. 1205 and S. 493.
Here's a summary of the act from Autism Speaks, the organization from which I got the legislative update. (Please note that the bill is in no way exclusive to autism; that's just the particular disability community that I'm tuned into.)
The ABLE Accounts Act of 2009 – or Achieving a Better Life Experience Act – would amend the IRS code to provide for the establishment of savings accounts "for the purpose of supporting individuals with disabilities to maintain health, independence, and quality of life." Similar in many respects to existing 529 college savings plans, these accounts will be exempt from federal taxation, provided certain rules are met. The legislation’s intent is to supplement rather than to replace benefits provided by other sources, including Medicaid and private insurance.
What could it be spent on? Glad you asked...
Allowable expenses include: preschool education; postsecondary education; tutoring; special education services; training; employment supports; personal assistance supports; community-based supports; respite care; clothing; assistive technology; home modifications; out-of-pocket medical, vision, or dental expenses; transportation vehicle purchases or modifications; insurance premiums; habilitation and rehabilitation services; funeral and burial expenses; and other services or products allowed by regulation.
Here is a link to the text of the bill itself (Senate version, in pdf). One element that I was glad to see: it looks as if one would be allowed to transfer money from a 529 into an ABLE account without the tax hit.
The bill was introduced in the House by Ander Crenshaw (R-FL), with co-sponsors Congressmen Patrick Kennedy (D-RI), Cathy McMorris Rodgers (R-WA), and Kendrick Meek (D-FL). In the Senate, it was introduced by Senator Robert Casey (D-PA), Senator Orrin Hatch (R-UT, and Senator Christopher Dodd (D-CT), and co-sponsored by Senators Richard Burr (R-NC), Edward Kennedy (D-MA), and Sam Brownback (R-KS). Bipartisanship we can believe in!
Please take a moment to drop a note or call to your senators & representative urging them to support/co-sponsor this bill. There's a handy page for generating constituent support letters over at Autism Speaks, but if you're not a fan of theirs or don't have an autism stake in this issue, you can look up your elected officials' contact information here.
We, and so many other people with disabilities and their families, need to get from "a bad place" to a better one. This bill is a strong and necessary step in that direction. Please help!