by John Darer CLU ChFC CSSC
The Disability Savings Act of 2008, introduced by Senator Christopher Dodd (D-CT) on March 11, 2008 as Senate Bill 2741, would amend the Internal Revenue Code to allow a tax exemption for disability savings accounts (DSA) that have a value of $250,000 or less and are established for beneficiaries under the age of 65 who are blind or disabled. The proposed act:
- Allows tax-free distributions from such accounts for certain services provided to account beneficiaries, including education services, respite care, clothing, therapy, nutritional management, and funeral and burial expenses.
- Allows tax credits for contributions of up to $2,000 made to a disability savings account (DSA) and for certain entities that maintain disability savings accounts.
- Permits disability savings accounts to be disregarded in determining eligibility for Medicaid benefits and certain other means-tested federal programs.
- Requires the Secretary of Health and Human Services to establish a program for marketing, outreach, and education related to disability savings accounts.
I believe that this would be a positive development for the disabled and their families. While some would feel this a threat to structured settlements. I don't feel the same way. At a value of $250,000 or less, and given the industry shift to a settlement planning, settlement consulting or recovery management model, the putative "DSA" should be embraced by industry participants as a new settlement financial planning tool. Moreover it will also be especially helpful to those who have disabled family members where there has been no actionable tort recovery.
- There clearly is an opportunity for an astute annuity issuer or trust company to use its resources NOW to develop a product that could work as a stand alone or in tandem with a structured settlement annuity.
- This also is an opportunity for industry members to expand their skill sets and add value to client relationships.
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