Adopting a Child R=
equires
a Specific Financial Plan
Adopting
a child is a massive decision, probably bigger than education, marriage or
career. Few individuals or couples anticipate how expensive it is to have a
biological child, and depending on your choice of adoption scenario
you’re going to need a financial plan.
It’s
not overstating to say that in some situations, you may be paying the price=
of
a current four-year public college degree just to complete the adoption
process.
Here’s
a very general review of those figures. The least expensive form of adoption
comes from your local foster care system. Your cost could conceivably be ze=
ro
since states often subsidize these programs to place these children. Meanwh=
ile,
agency and private domestic adoptions can range from $5,000 to $40,000
depending on agency and attorney fees, travel expenses, birth mother health=
and
living expenses, state requirements and many other factors unique to the
situation. International adoptions are somewhere in the middle of that cost
range even with travel, adoption agency and other fees and expenses that ne=
ed
to be paid on the ground in the country of adoption.
All
parenthood comes at a price. But with the help of a financial planner, you =
can
not only afford the adoption but continue your planning for your child̵=
7;s
upbringing and your retirement. Here are some financial stepping stones to a
successful adoption:
Create a financ=
ial
plan or re-evaluate your existing one: As you already know, a financial plan is a
written set of goals, strategies and a timeline for accomplishing those goa=
ls.
It starts with the basics – determining how much you really have in
savings, debt, insurance and investments. Your planner can also help you
understand how much the additional costs of adopting and raising a child wi=
ll
affect all those numbers.
Get rid of your
high-interest debt:
A major decision like having a child is a good reason to take a “clean
slate” approach to debt. Before you can build a reserve fund, it̵=
7;s
wisest to pay off your credit cards and any other high-rate debt first.
M=
ake
sure you have a solid estate plan in place: Today, adoptive parents are typica=
lly
older and closer to retirement. That means you have to create an estate plan
and a safety net of insurance and savings that will secure your child’=
;s
future if the worst happens. Also, if you are a single parent or part of an
unmarried couple hoping to adopt, the whole issue of estate planning becomes
much more critical. You may also want to consider separate guardianship for=
the
child and the child’s finances.
Check your insu=
rance
options:
In today’s health, life and home insurance environment, the addition =
of a
child to a policy can bring additional cost – sometimes without the
guarantee of the best coverage. Before you start the adoption process, check
with your employer or your independent insurance agent to make sure you have
the best coverage for what you can afford. If you’re self-employed,
family coverage becomes an extremely expensive bargain, so you really need =
to evaluate
your options since you’re footing the entire bill. Also, keep in mind
that you can put an adopted child on your health plan within 30 days of the
adoption date, but if you delay, you might have to wait until the next open
enrollment session to put your child on your insurance.
Know your tax
advantages: Families
adopting overseas can get some tax relief. Parents are entitled to a one-ti=
me
tax credit of $11,390 in 2007 for adoption expenses. Though the credit
can’t be reduced by the alternative minimum tax, qualifying expenses
include paperwork costs, court costs, attorney fees and all travel expenses
including meals and lodging. =
This
amount is phased out if an individual’s modified adjusted gross income
(MAGI) is between $170,820 and $210,820. Over the $210,820 level, taxpayers
can’t claim the credit or exclusion.
Build your rese=
rve
fund: When a baby, to=
ddler
or older child comes into the house, money flies out the door at a velocity
most childless people have never seen. Children always cost money and somet=
imes
unpredictably so, but it pays to build your savings before they arrive so y=
ou
won’t overuse your credit cards. Also, in the case of surrogacy,
it’s possible that a birth mother’s health may take a turn duri=
ng
the pregnancy, so that’s an expense that needs to be anticipated.
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This column is
produced by the Financial Planning Association, the membership organization=
for
the financial planning community, and is provided by Anneliese D’Souz=
a,
CFP®, a local member of FPA
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