New Option for Parents of Special Needs Children
There were a lot of things in the "Cromnibus" budget law with which people took issue. One thing that shouldn't be objectionable is the establishment of 529A plans. The purpose of the 529A is to allow parents and others to accumulate assets for special needs children and subsequently use those assets without paying taxes (assuming qualified use).
529A plans will become "legal" in 2015 although you may not be able to get one next year. The IRS has around 6 months to establish the rules to govern the accounts. After that, the states will have to set up the plans...you will only be able to establish accounts through the state where you are a resident. But, once they are established the plans should be a nice benefit for parents of special needs children.
Traditionally, if you wanted to accumulate assets for the future use of a special needs child you probably would need a trust. Trusts were needed to make sure the funds did not disqualify the child for state benefits. The 529A plan will accomplish the same thing...Assets available for the special needs child and the ability to qualify for state aid. The 529A plan will also eliminate some of the "nasty" things that come with a trust. The first is expense. Trusts can be expensive to administer especially if a professional trustee is needed. Trusts also need to pay taxes if they don't pay out all their income. It appears that a 529A plan won't have this issue. Finally, a gift to a trust is not eligible for the annual gift tax exclusion (currently $14,000) as the gift is not a gift of a present interest. "Normal" 529 plans are not subject to this limitation so I assume that will be the case for 529A plans as well...we'll see.
There may still be a need to use trusts in a special needs plan, so don't rule them out and the details on these plans still need to be "fleshed-out".
The bottom line is if this applies to you, you'll want to check with your financial and/or estate planner to see if the 529A plan makes sense in your overall Financial Plan.