A proposal to create a new savings vehicle for families of those with disabilities might be on the House agenda early this year.
Inspired by the family of a child with Down syndrome, Rep. Ander Crenshaw, R-Fla., last May introduced HR 2370, the Financial Security Accounts for Individuals with Disabilities Act of 2007, to create a tax-exempt savings account for those with disabilities.
Under his proposal, the principal in the accounts would accrue interest tax-free for the life of the beneficiary. The funds could be used to pay for education, medical and dental care, community services, employment training, assistive technology, housing and transportation.
Distributions would be excluded from beneficiaries' gross income so they would still qualify for government benefits. Anyone would be allowed to contribute, with contributions capped at $500,000 for the life of the account.
An effort to estimate the costs of the proposal is under way and targeted for completion in the current quarter, Mr. Crenshaw said in an interview. The bill can then be brought up for discussion by the Ways and Means Committee.
"We have financial tools to help parents with education and health care," Mr. Crenshaw said. "But we have no financial tool like this available for the family of a child with disabilities."
There are 51.2 million Americans, or about 18% of the U.S. population, who have some level of disability, according to the U.S. Census Bureau.
"[Disabled people] have different needs as kids, and different needs for the future," Mr. Crenshaw said.
Those with disabilities are living longer than they did in the past and the number of people receiving support services is growing, rising 36.8% between 1991 and 2002.
With government benefits facing an uncertain future, finding a way to encourage families to save was the catalyst for a similar proposal that was crafted in Massachusetts and presented to the President's Committee for People with Intellectual Disabilities in 2004 by James Brett, a former member of the committee. He is president and chief executive of the New England Council, a regional business organization.
The proposal to the committee would create a qualified disability savings account, which would accrue interest tax-free and not count as an asset in determining government benefits.
The committee adopted the proposal and included it among a series of recommendations to President Bush, who hasn't acted on it.
"Government is just not going to be able to provide all of the necessary services and programs," Mr. Brett said. "This is an option that will empower families to have greater control over providing programs and services for their loved ones."
Currently, many families of children with disabilities use a special-needs trust to save money and protect the child's eligibility for government benefits. The trust is often tied to the deaths of the parents or funded by life insurance.
"The special-needs trust doesn't offer tax advantages," said John Nadworny, an attorney and certified financial planner at Bay Financial Associates LLC of Waltham, Mass., who worked on the QDSA proposal.
Learning the intricacies of special-needs planning was borne of necessity for Mr. Nadworny when his son was born with Down syndrome 16 years ago.
He teamed with Bay Financial colleague Cynthia Haddad, a CFP at the firm who has a brother with developmental disabilities, to write "The Special Needs Planning Guide: How to Prepare for Every Stage of Your Child's Life" (Brookes Publishing Co., 2007).
The book is one of the first of its kind to combine financial planning with a focus on families, said Melanie Allred, a spokeswoman for Brookes Publishing.
The authors identify five planning factors and strategies for every stage of a child's life, from infancy to adulthood.
"The planner is trained to quantify the savings requirement to reach a specific goal," Mr. Nadworny said. "The hard part of planning for people with special needs is it's very difficult to quantify the financial need."
Much of the work involves trusts, said Harry Margolis, president of Margolis and Associates, a Boston law firm. He is also a co-founder of the Academy of Special Needs Planners in Providence, R.I., which has 172 members and was launched with several other attorneys a little over a year ago.
The academy has an informational site for the public, specialneedsanswers.com. It also hosts meetings and conference calls, and has a website for its members.
"The trust can be drafted so children can get the government benefits, Social Security insurance, housing, Medicaid, and still have the trust available for whatever the benefits don't provide such as supervision, care management, etc.," Mr. Margolis said.
"Public benefits are rarely enough ... that needs to be supplemented by private funds," he said.
Sue Asci can be reached at firstname.lastname@example.org.