According to the U.S. Department of Health and Human Services, the costs of adopting can be anywhere from a few hundred dollars to more than $40,000, depending on the form of adoption you select. That means that you need to get your finances in order before you adopt by doing your homework. You need to be certain before you proceed that the price of thwart your plans for retirement, or eat into your college savings plans for this child. You must also be attuned to the higher daily living expenses that a new member to your family will bring. Starting a family is a major overall financial commitment—no matter what strategy you choose, so plan ahead. Here’s some tips:
Examine your finances first. Work with qualified financial or tax professionals to review if you will be able to manage adoption costs from savings or, even better, see if you can qualify for one of the many grant programs that are out there for adoptive parents that you don't have to pay back.
Understand the tax benefits of adoption. The federal government has tax breaks for adoption, but make sure you study and follow the rules. The IRS says that tax benefits for adoption include both a tax credit for qualified adoption expenses paid to adopt an eligible child and an exclusion from income for employer-provided adoption assistance. The credit's nonrefundable, so it's limited to one's tax liability for the year. Any credit in excess of tax liability can be carried forward for up to five years. In addition, adoptions of special needs children may qualify for special tax treatment.
Look into workplace benefits. A recent study showed that about 12% of U.S. employers offered a financial adoption benefit in 1990, compared to 52% now. See if your employer offers adoption benefits and factor those benefits into your overall financial plan.
Gauge your legal costs. This is a legal process, and based on the type of adoption process you pursue, you'll need to consult with an attorney to make sure your application is in order and your rights are protected.
Networking and education. A huge leg up on the entire process is getting involved with support and planning groups for parents of adopted kids and those who are planning to adopt.
Sound financial planning to support your adoption process will help give your new family the best possible start; then it’s time to get your estate planning completed including a 'child safeguard plan'. We can help you with that. Give us a call to schedule your complimentary consultation or register online for one of our seminars on a topic of interest to you and your loved ones.
Reference: Biz Times (May 3, 2016) "Getting your finances ready for adoption"