November 14, 2018

Booze, Women or Movies: What do Poor People Spend Money On?

Photo from Pexels.

During the recent Tax Bill debate in Congress, Senator Sen. Charles E. Grassley (R-Iowa) gave a jaw-dropping interview with the Des Moines Register, his state’s largest newspaper. In explaining why multi-millionaires shouldn’t have to pay any estate taxes, he colorfully explained his reasoning: “I think not having the estate tax recognizes the people that are investing,” Grassley told the Register. “As opposed to those that are just spending every darn penny they have, whether it’s on booze or women or movies.”

This is not the reality of what I am seeing as the Founding Executive Director of the new community-based nonprofit, the Jewish Los Angeles Special Needs Trust (JLA Trust) which offers 1st and 3rd party pooled special needs trusts at costs far below the commercial market. Special needs trusts allow persons with disabilities or severe chronic health conditions to receive supplemental private funds without jeopardizing their essential government benefits such as SSI, which provides a monthly cash grant for rent and food, maxing out at less than $900, and Medicaid, heath-care insurance for very low income persons.

Since we opened our doors for beneficiaries in August of 2016, my staff and I have spoken with more than 500 people with disabilities, their family members and Jewish and general community professionals including many trust and estate attorneys. All of our enrolled beneficiaries have pooled trust sub-accounts; the average lump-sum payment received is $40,000, and all client funds are invested in conservative to moderate custodial Charles Schwab accounts, managed by True Link, our financial services partner.

It should come as no surprise that the number one requested use of funds is for rent, since LA area housing prices are already sky-high for the middle class, let alone for someone living on less than $900 a month. Unfortunately, federal rules impose a penalty if anyone, including the person’s special needs trustee, use funds other than SSI to pay for rent, so most of our clients are stuck where they are, even if it means living with hostile roommates or in austere, undesirable Board and Care facilities.

Close behind rent is an essential health service out of reach for most poor adults in America – dental care- especially when it comes to expensive but necessary procedures such as dentures, implants and gum surgery, not covered by Denti-Cal (the dental program for Medi-Cal recipients). For years, dental care was eliminated for all poor adults under Medi-Cal, and even now, is highly restrictive and difficult to obtain. One of our clients, a veteran, has been fighting the VA for years to get his dentures replaced, as his first set wore out and was no longer functional.

JLA Trust clients often request funds for transportation. Since the majority can’t drive because of their disabilities, they often ask for monthly bus passes or a monthly allowance with ride sharing companies such as Lyft. In Los Angeles, this service is essential to managing life independently, from bringing home groceries to getting to a medical office.

Also frequently requested is a smart phone that connects to the Internet. Although the free so-called “Obama” flip cell phones for persons on welfare or other government benefits provide basic phone and texting capacities, they don’t connect to the Internet, which is needed for so many everyday needs, from refilling prescriptions to filling out government forms.

For our clients with more severe physical disabilities, whether from a genetic condition, brain injury or old age, there is a need for in-home health care that will assist them with such everyday tasks as showering and cooking. Although some in-home health care is available for free for very low-income clients from the In-Home Supportive Services program, it can be difficult to qualify for, or in some cases, is wholly inadequate for independent living. For example, a case worker from the LA County assessed one client as needing 4 hours a day of help, for all meals and toileting, but then only paying for one 4-hour block of services, oblivious to the fact that nature may call outside of that 4-hour block.

Most interesting of all is that our 1st party clients, most of whom have been living on or below the federal poverty line for years as a result of their disabilities, are very excited to have a chance to invest their inheritance or legal settlement. They take their time to carefully choose among their investment options and ask how their portfolio is doing. Senator Grassley, it turns out poor people want to grow their money just as much as the wealthy—they just need a chance to do so.