Financial Planning & Adoption

Two weeks ago, I became the proud uncle of an 11-year old boy at a wonderful celebration where more than 80 foster children found homes in Tucson, Arizona. My sister, after much thought and a long and sometimes trying process, successfully welcomed her son to our family.    

In travelling back home from the weekend’s events, it dawned on me that there are a host of financial planning issues that surround an adoption above and beyond traditional family planning.  Given that November is National Adoption Month, I thought it’d be worth sharing this story and visiting the topic to highlight some of the key issues.

Estate Planning

There are many estate planning issues surrounding adoption that deserve your attention. 

First and foremost, everything that would apply to anyone welcoming a child into their family still applies. This typically includes a Will, health care power of attorney, durable power of attorney, a parental appointment of guardian for minors and, in many instances, a trust. 

On that topic, a trust is often appropriate for any parent of a minor, but can be especially important in ensuring your estate is managed as you wish in terms of the care of your adopted child(ren). There can be a higher degree of risk for outside parties making undesired claim to custody of your child solely for the purpose of gaining access to your estate if guardianship wishes aren’t clear. By firmly dictating the terms of care for your child and naming a self-appointed guardian and trustee, you eliminate any opportunity for those lines to be blurred.

Another idea is to write a letter as part of your plan detailing the story of your child’s adoption, any details they may or may not know and at what age you want those to be shared, if at all. If your adoption was done abroad, and you wish to continue your child’s exposure to their native culture on an ongoing basis, you can say so. Spelling out these types of issues in detail can ensure your wishes are met and take the burden off the guardian to decide when and what to disclose.

If you’re in the process of adopting, but the adoption is not yet complete, there are essentially no legal rights between you and your soon-to-be child despite the fact you may already consider them family, have been a foster parent to them for some time, etc. There are steps you can take to provide for a child that’s in the midst of the adoptive process.

Grandparents should also be a consideration. Ensure that their estate plans clearly define their wishes and clearly define their adopted grandchildren as part of their heirs.  

Lastly, make special consideration for changes to estate law. While this is true for all of us, details surrounding the definition of heirs and other rights can be tweaked just enough to ruin a perfectly well-laid plan. Checking in regularly with an estate attorney who has some background in the area of adoption is time well-spent.

Other Assistance

In most cases, adopting entitles the parent to the Federal Adoption Tax Credit which can help support the costs of bringing a new dependent into your home. There are often many other credits and opportunities for assistance and the state and local levels. These can include state tax credits and assistance with everything from health insurance costs to meaningful savings on college tuition. Consult your adoption agency and your tax preparer to learn more and ensure you’re receiving the assistance available.

These are just a few of the unique situations that need to be addressed when going through the already overwhelming process of adopting a child. The most important piece of advice is to make sure you talk often with the agency you’re going through, your financial planner, attorney or another trusted advisor to ensure all the details are covered.

Congratulations to all those families who found that special someone to add to their ranks this month!