Monday, February 9, 2015

Proposed Minnesota law would help parents save for disabled children’s future

by Doug Bleden from St. Paul Pioneer Press:
Leslie Sieleni found out her son had Down syndrome when he was 5 days old.
Now 14, Sean Sieleni talks about driving a car, going to college, living on his own and getting a job. His mom supports those dreams, but she worries.
“He’s going into 10th grade next year. I’m starting to hyperventilate a little bit about what is he going to do after school,” said Leslie Sieleni, of White Bear Lake.
One thing that eases her mind is the prospect of Minnesota authorizing a new kind of savings plan that gets its first committee hearing Monday in the state Senate.
So-called “ABLE” accounts — which stands for Achieving a Better Life Experience — allow parents to sock away money for blind or disabled children in the same kind of tax-advantaged 529 account they now can set up to pay for higher education for their college-bound kids.
Currently, disabled people can lose eligibility for public benefits once they reach $2,000 in savings.
With an ABLE account, contributions of up to $14,000 per year are allowed under current rules. The account could grow to $100,000 before Social Security Supplemental Security Income would be suspended.
Contributions themselves are not tax-deductible, but earnings accumulate on a tax-deferred basis and distributions are tax-exempt if used for approved purposes including housing, transportation, education, health care, support services and training.
To qualify, a person must have a significant disability with an onset before age 26.
“I think it’s great because it’s not overreaching and it’s not underreaching. It just kind of fits that one spot where we didn’t have something: How does somebody with a disability put some money aside to do something? To basically be living like their peers,” said Lori Guzman, an attorney in Apple Valley who works with families who have individuals with disabilities.
She cautions that an ABLE account doesn’t replace the need for long-term estate planning. Families will want to consider trusts as well, she said, because the ABLE account is capped. “When they die, they can’t just dump this in there,” she said.
But ABLE accounts do allow parents to equalize the way they treat their disabled and nondisabled kids in terms of annual gifting for estate purposes, said Guzman, who has two children in addition to a developmentally delayed daughter who died.
Currently, “they can give it to each one of their children who don’t have a disability, but they can’t put anything aside for the child with a disability to reduce their estate. This is a perfect answer for that,” she said.
Already in Minnesota’s tax code
In the first bill signed into law this session, Minnesota lawmakers and Gov. Mark Dayton included the federal ABLE act, which was signed by President Obama in December, in the state tax code along with incorporating other federal provisions.
But lawmakers still would have to pass a bill to set up ABLE accounts in Minnesota.
A Senate bill to do that gets its first hearing today in the Health, Human Services and Housing committee. The House bill is scheduled for a hearing Tuesday.
“It’s so unbelievably burdensome and expensive and just draining on any family to put in the effort when you have a special-needs child,” said Rep. Nick Zerwas, R-Elk River, who’s sponsoring the bill in the House. “Allowing for Minnesota families to take advantage of this federal program, to save money throughout the years, to provide a savings account or a nest egg into the future, I think it’s the right thing to do.”
“This is a great equalizer. This gets us in the right direction,” said Sen. John Hoffman, DFL-Champlin, who is carrying the bill in the Senate.
Neither Zerwas nor Hoffman said they’d heard any opposition to the idea so far.
“I think we’re all empathetic in this kind of a direction, so I would be surprised if that was not well-supported. It’s the right thing to do, irrespective of party,” said Sen. Dave Senjem, R-Rochester.
The state’s Revenue Department estimates implementing ABLE accounts in Minnesota would cost $70,000 in the first biennium and $350,000 the second. The state’s 2016-17 budget is expected to be roughly $42 billion.
More affordable than a trust
John Hetterick of Plymouth has two adult children with disabilities and was involved in conceptualizing the plan that led to passage of the ABLE Act in Congress.
One advantage of ABLE accounts, he said, is they save families the few thousand dollars in attorney’s fees they might pay to set up a trust.
Often, families who discover they have a disabled child don’t know how to navigate the system, said Hetterick, who serves on the boards of the National Disability Institute and The Arc Greater Twin Cities.
“The thing I’m really looking for is, and ABLE act is part of it, is getting people aware of the needs they are going to face early on in the process so they can actually start putting money away for it,” he said.
An early road map of what’s ahead would be hugely beneficial for parents of disabled kids, Leslie Selieni says.
“Instead you get a doctor that looks at you and bows their head and tells you, ‘We’re sorry.’ That’s what you get. You don’t get the ‘You know what, you’re going to be OK, this is what you need to do, call this person, call this person, call this person. You don’t get that. You are just basically handed a baby that they think is not perfect, but in your heart you know it is. And pretty much you fend for yourself, you try to figure it out.”
Sieleni, who has two older children who are not disabled, said her mother-in-law set up a savings account to help Sean, but “I had to have her stop because he reached the $2,000 mark.”
As Sean heads into his teen years, Sieleni said the fear of the unknown and what he might need down the road gnaw at her, and she’d feel better if the family could start building a pot of money.
“It’s going to help him so much with his dreams and aspirations. That just opened the door for him to further advance and live independently and be a valuable member of the community. That’s everything a parent could dream of,” she said.
“I worry about where he’s going to live, I worry about if he’s going to live with us forever, I worry about him getting back and forth to work every single day. I worry about him getting a job, because they typically don’t get the high paying jobs. They are forced to be in poverty for a very long time, so this will take care of a lot of that.”
What is an ABLE account?
It’s a tax-advantaged account that allows families with disabled or blind children to accumulate savings similar to a 529 college savings plan.
Income earned in an ABLE account accumulates on a tax-deferred basis, and distributions for disability-related expenses including housing, transportation, education, health care, support services, training and others are tax-exempt. Contributions to the account are not tax-deductible.
To qualify, a person must have a significant disability with an onset before age 26.

1 comment:

  1. Finally!!! This is a step in the right direction. Let's press for more steps.