Tax free trusts legislation approved

Allen Legislation Would Study Feasibility of Tax Free Trusts for Individuals with Developmental Disabilities

Legislation approved Feb. 4 by the Senate Health, Human Services, and Senior Citizens Committee would commission a study on the feasibility of allowing family members and caregivers of persons with developmental disabilities to establish tax-free trusts for the long term care needs of those individuals.

S-1034 is sponsored by Senator Diane Allen and explores the possibility of allowing pre-state tax contributions to special needs care and placement trusts designed to supplement Medicaid benefits received by persons with disabilities.  Current law allows the establishment of such accounts, but does not allow for pre-tax contributions.

“Caring for a loved one with developmental disabilities is an emotionally and financially stressful undertaking,” said Allen (R- Burlington).  “That stress is rooted not only in the immediate needs of the individual, but in trying to ensure that person is cared for into the future.  This study will examine whether it is feasible for the state to establish health savings account style trusts funded with tax free contributions by family members or other caregivers and guardians to provide for these individuals’ long term care needs.”

The bill also requires the study to consult with advocates for the disability community to determine how best to promote and disseminate information regarding these trusts.  The study would be directed by the Division of Developmental Disabilities within the state Department of Human Services.