= = = = = = = = =
"You're in a bad place."
That's how the lawyer summarized our situation, with regards to saving for Joy's future needs.
Not long after the births of Rose and Joy, 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. We have a relative who has done the same for them in another state, too.
Rose is, pretty obviously, a very good bet for higher education eventually, little human dictionary and all.
With Joy, the educational trajectory has been so confusing. We really have no idea what will be going on with her by the time she finishes school (or the school system finishes with her). Heck, she's only four [update: now she's seven, and we still have no idea!]
But as she 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 accounts for her. The rules of the 529 are clear: you can only use it for higher education expenses. If you take it out for anything else: big honkin' tax hit.
We surely don't want to sell Joy short, but it seems pretty clear that she's 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 place 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, and then it's definitely lawyer-business (i.e. attorney's fees) to set up, unlike the 529 that you can do on your own.
But the 529 isn't a great bet for her 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 election between then and now! [Update: hmm, the 2008 elections didn't manage to make the difference. Maybe there will be some traction as elected officials campaign for 2012?]
And... 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. [Update: the 2011 version bill numbers, introduced Nov. 15, 2011, are H.R. 3423 and S. 1872]
Here's a summary of the legislation (updated link & summary for 2011):
The ABLE Act -- introduced with bi-partisan support in the House (HR.3423) by Congressman Ander Crenshaw (R-FL) and Congresswoman Cathy McMorris Rodgers (R-WA), and in the Senate (S.1872) by Senators Robert Casey, Jr. (D-PA) and Richard Burr (R-NC)-- would amend Section 529 of the Internal Revenue Service Code to allow individuals with disabilities and their families to deposit earnings to tax-exempt savings accounts. The funds could be used to pay for qualified expenses, including education, housing and transportation, and would supplement, not replace, benefits provided through private insurance, employment or public programs.
And what could it be spent on? Glad you asked...
Qualified disability expenses would include: school tuition and related educational materials; expenses for securing and maintaining a primary residence; transportation; employment supports; health prevention and wellness costs; assistive technology and personal support; and various miscellaneous expenses associated with independent living.
Here is a link to the text of the bill itself (Senate version for 2011, in pdf). One element that I was glad to see: it looks as if one would be allowed to transfer money from an educational 529 into an ABLE account without the tax hit.
[In 2009] 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). Update: in 2011, it was sponsored in the Senate by Robert Casey, Jr (D-PA) and Richard Burr (R-NC); in the house by Ander Crenshaw (FL), Chris Van Hollen (D-MD), and Cathy McMorris Rogers (R-WA). Bipartisanship, can you even believe it?!
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, or you can look up your elected officials' contact information here and contact them directly.
If you can take a few minutes to do this, that would make us so happy! And you'll have earned the right to come back and brag about in the comments about how you're helping us get to a better place!
Do let me know if you have any questions, either in the comments or via e-mail.