What to Do Before You Adopt
December 27, 2016I recently had the joy of attending a party for friends that finalized the adoption of their son. I watch them go through the emotional highs and lows of their 18-month process. Afterwards, I asked them for lessons learned from the adoption process. They both said they wished that strategies to financially prepare for adoption were emphasized as much as the legal process. If they could go back, they would had put more emphasis on the following:
1. Assess your own finances. Ideally, you should have 3-6 months worth of living expenses saved (separate from the funds for adoption) so an emergency does not derail you from adopting. Living expenses should be captured in a spending plan so you have a clear idea of how much you need to have monthly to maintain your living standard.
2. Calculate the best and worst case adoption expense. The type of adoption you choose can dramatically affect adoption costs, which can range from $0 to $50,000. Include the costs of bringing the child(ren) into your household – furniture, clothing, school activities, extra healthcare insurance, etc.
Research the costs for the type of adoption you are considering and be prepared to be flexible. If an international adoption is cost prohibitive, a domestic program may be a consideration. Some state foster to adoption programs can be run privately, offering a plethora of services at minimum costs.
3. Research how you will come up with the funds. Calculate how much you can save per month and how long it will take for to have the funds for the expenses. If you find yourself short of funds, research alternatives. Think outside the box and network with other adoptive parents to come up with ideas. If you have a gift for spinning a compelling story, consider starting a GoFundMe fund, conduct a fundraising activity or ask your employer about adoption assistance.
4. Understand tax incentives for adoptions. Aside from your employer’s adoption assistance, research the various tax incentives for adoptions. IRS Publication Topic 607 spells out expenses that qualifies for the adoption credit and adoption assistance programs. There is a nonrefundable credit for qualified adoption expenses and possibly an exclusion of income for employer-provided adoption assistance.
Don’t make the same mistake as my friends. Consider taking some time to research not only the adoption legal process but also the financial impact an adoption may have on your finances. The better prepared you are, the less likely a financial hiccup will affect your desire to grow your family.