Financial Considerations of Adopting a Child in Foster Care Part II

Last time, we discussed the various adoption opportunities (private, international and foster care) along with the average cost associated with each. We also walked through the basic steps for adopting one of the 428,000 children currently in foster care. In this article, we will review the different financial assistance available for those adopting children in foster care.

Financial Adoption Resources

In addition to Federal and State financial assistance for children adopted from foster care, families may be able to access employer-provided adoption benefits, tax credits, and loans or grants to offset adoption expenses.

Employer Benefits

Many companies and organizations offer benefits such as leave or financial assistance to their employees who are adopting. Your employee benefits office will be able to tell you if your company participates.

  • Financial assistance - Aon Hewitt’s 2015 annual survey found that 56% of employers offer financial adoption benefits. Most employers offer a lump sum payment to help with adoption expenses. These benefits range from $500 to $25,300, with the average policy offering a maximum benefit of $8,000, according to the Dave Thomas Foundation for Adoption.

  • Parental leave - Companies with more than 50 employees are required by law to grant parental leave to employees adopting a child. Both mother and father are eligible for up to 12 weeks of unpaid leave.

  • Active duty military benefits - The military offers up to $2,000 per child for adoption expenses and up to 21 days of leave.

Tax Credits

Adoption tax credits may also offset adoption expenses.

  • Federal adoption tax credits – These are issued on a one-time per child basis to assist with adoption costs (adoption fees, court costs, travel expenses, etc.). The amount is dependent on the family income, whether the child has special needs and whether there are other employer-based benefits available. The current maximum allowable adoption tax credit is $13,570. Note that the credit only applies to the tax year that the adoption was finalized. If you fail to claim it in the proper year, you may be unable to use this credit. Information about tax credits for adoption can be found on the IRS website. (You should review these with your CPA or financial advisor, as anything related to tax code can be confusing).

  • State adoption tax credits – Policies vary by state on the specific eligibility, benefit and funding. You can review your state’s adoption subsidy profile on the North American Council for Adoptable Children’s website.

Adoption Loans and Grants

There are various loans and grants available to families wanting to adopt a child. All of them have specific eligibility requirements. The National Council for Adoption and the National Adoption Foundation both have resources available for families seeking grants and loans.

Federal Title IV-E Adoption Assistance: Adopting a Foster Child With Special Needs

According to the Child Welfare Information Gateway, The Adoption Assistance and Child Welfare Act of 1980 provided the first Federal subsidies to encourage the adoption of children from the nation’s foster care system. The subsidies, known as adoption assistance, aim to minimize the financial obstacles to adoption.

Federal Title IV-E is one such vehicle for assistance for those adopting a child with special needs. Depending on the child’s needs, funds may be available to parents in two forms:

  • One-time adoption assistance – This is nonrecurring reimbursement for reasonable and necessary adoption transaction costs (home study, court costs, attorney fees, etc.). Amounts received by families vary per state, but the Federal limit is $2,000 for each child. Further expenses may be tax deductible.

  • Recurring adoption assistance – These are monthly maintenance payments for the child’s care until they reach the age of 18 (or 21 in some states). The maximum amount paid out will not exceed the amount the state would pay to maintain the child in foster care.

It is important to note that a child is not automatically eligible for Title IV-E Adoption Assistance. A Title IV-E agency will examine various factors to determine a child’s eligibility.

State Adoption Assistance for a Child With Special Needs

Children with special needs who are not eligible for the Federal IV-E adoption assistance program can receive state adoption assistance. Eligibility requirements vary by state, however. Assistance generally falls into three categories:

  • Medical assistance – provides coverage for some or all costs related to the child’s medical condition that are not covered by the family’s health insurance.

  • Direct payment assistance – payment directly to the adoptive family to assist with special physical, mental or emotional needs of the child.

  • Supplemental adoptions assistance – coverage for a child’s emergency or extraordinary needs.

If you have questions regarding state adoption assistance programs in your state, you may review the Child Welfare Information Gateway website with your financial advisor. The site provides detailed adoption assistance information by state. It’s important to work with your advisor prior to completing the process to be sure you don’t miss out on the rules and benefits available to you.

Adopting a child can be a blessing for families. You can help make the financial transition smoother by working with a trusted financial planner. Your financial advisor can address concerns you may have regarding expenses and put a plan in place to help ensure the financial stability of the entire family.

Wood Smith Advisors, a woman-owned Registered Investment Advisor (RIA), is a fee-only financial services firm that partners with its clients to simplify their financial lives. We focus on women, entrepreneurs and individuals with complex financial situations, providing objective and competent advice, education and services to help them develop and build their businesses and reach their financial goals. We can be reached by clicking here.

“Finance Made Simple” blog posts are intended for educational purposes and not for specific advice. Each person’s situation is different. Consult your financial advisor for advice relating to topics discussed.

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