CNC Longarm quilt machine conversion - using encoders

It’s been years since I’ve done a Linuxcnc build, so here is what I want to do. We have a longarm quilting machine that has encoders on X and Y axis to do stitch regulation. I am converting the machine to CNC but need option of free motion. Commercial machines have the ability to disengage the motors to allow free motion, while the encoders track where the machine travels. Once you are done, you engage the motors, and the encoder travel offsets are used to adjust the machines last motor driven position. I have access to the encoder signals, and have devised a simple motor gearbox disconnect that is controlled by button on jog pendant. 

So I need a routine to record current X and Y values when the motors are disengaged, then start tracking the encoders. Once the motors are engaged, the encoder travel values are added to the old X and Y so the machine does not get “lost” in the frame. Then the program can start or resume as needed.

The encoder stuff is okay, just not sure of best way to use that data to offset the current joint positions.  
Thanks for any input on this idea.