Getting Your Finances Ready for Adoption

When you think about it, planning to start a family through adoption is not much different than starting a biological family - it's all joyful. However, the unique costs and considerations of adoption make financial planning a necessity.

According to the U.S. Department of Health and Human Services, the costs of adopting are at both ends of the financial spectrum. Adopting through your community foster system may be truly minimal in cost and a chance to help some of the most at-risk children in your community. Meanwhile, various forms of private and foreign adoption may exceed $40,000 based on the process you choose. The agency's most recent numbers look like this:

• Public Agency (Foster Care) Adoptions $0 - $2,500
• Licensed Private Agency Adoptions $5,000 - $40,000+
Independent Adoptions $8,000 - $40,000+
Facilitated/Unlicensed Adoptions $5,000 - $40,000+
Intercountry Adoptions $15,000 - $30,000

Of course, having children is expensive no matter if they're biological or adopted. So how do you get your finances ready for adoption? By doing your homework and making sure the price and processing work of adoption - all adoption resources, rules and requirements differ locally - won't eclipse other essential financial goals like retirement, saving for your future child's education and of course, affording the higher daily living expenses of a new family. Start with these tips:

Evaluate your own finances first. It's generally a good idea to work with qualified financial or tax experts to evaluate whether you can manage adoption costs from savings or grants you don't have to pay back. Starting a family is a major overall financial commitment no matter what path you take to build yours.

Know the tax benefits of adoption. The federal government offers tax breaks for adoption, but you need to study and follow the rules. According to the IRS, 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 is nonrefundable, meaning that it is limited to one's tax liability for the year. Any credit in excess of tax liability may be carried for up to five years with the maximum dollar limit for 2015 at $13,400 per child. Adoptions of special needs children may qualify for special treatment. Visit IRS.gov for more details.

Check your workplace benefits. A 2013 Aon Hewitt study said only 12 percent of U.S. employers offered a financial adoption benefit in 1990 rising to 52 percent in 2012. Check with your employer to see whether they offer adoption benefits, and factor those benefits into your overall financial plan.

Know your legal costs.
Adoption is a legal process, and depending on the kind of adoption process you pursue, it is wise to work with an attorney to make sure your application is in order and your rights are being protected.

Evaluate available adoption grants. Various community groups, religious organizations and nonprofit organizations and foundations are valuable grant funding resources for the adoption process. Work with trusted advisors to find out if these resources are reliable and could help you afford your adoption.

Network and learn. Many communities and organizations sponsor support and planning groups for parents of adopted kids and those planning to adopt. Make your learning process about more than the money. Depending on the adoption avenue you're considering, make it a point to get to know parents who have already gone through the process to understand all sides of what their lives as adoptive parents are like.

Bottom line: Starting a family - no matter how you begin - is one of life's biggest and most rewarding decisions. Adoption requires its own form of financial planning, so it's important to research and seek qualified advice as early as possible.

Nathaniel Sillin directs Visa's financial education programs. To follow Practical Money Skills on Twitter: www.twitter.com/PracticalMoney

This article is intended to provide general information and should not be considered legal, tax or financial advice. It's always a good idea to consult a legal, tax or financial advisor for specific information on how certain laws apply to you and about your individual financial situation.