President Clinton signed into law the Omnibus Budget Reconciliation Act of 1993 on August 10, 1993. Buried among the sweeping changes in the Tax and employee benefits area made by OBRA ‘93, is one substantive change that should be of enormous benefit to the families who have adopted a child and families that are considering adoption. This change is revolutionary because it represents the first time since the promulgation of the Employee Retirement Income Security Act (ERISA) in 1974 that a particular benefit has been mandated under medical benefit plans governed by ERISA.

The new law requires that any “group health plan” which provides coverage for dependent children of plan participants, must provide benefits to dependent children placed with participants for adoption under the same terms and conditions as apply in the case of dependent children who are “natural” children of participants under the plan. Thus requirement applies irrespective of whether the adoption has become final.

Additionally, an employer’s group health plan may not restrict coverage of any dependent child adopted by participant, or placed with a participant for adoption, solely on the basis of preexisting condition of such child at the time that such child otherwise would become eligible for coverage under the plan, if the adoption or placement for adoption occurs while the participant is eligible for coverage under the plan. The law protects children who have not attained age 18 as of the date of the adoption or placement.

“Group health plans” includes the health and medical benefit plans of virtually every employer that is subject to ERISA in the United States. Group health plans includes both plans that are self insured by the employer and fully insured plans, under which benefits generally are provided directly by an insurance company. Employers that are not subject to ERISA and therefor, exempt from the new law, are governmental employers (which would be subject to state or federal laws governing coverage) and “churches” (which could include church sponsored organizations, such as hospitals).

For your adopted children to be entitled to coverage under your employer’s medical benefit plan you must be a plan participant and you must otherwise be eligible to elect family coverage under the plan. You must follow all other applicable requirements for coverage under the plan. If your adopted child (or child living with you prior to finalization) was denied coverage by your company before August 10, 1993 because of a pre-existing condition, the federal law mandates that your child now must be covered if you meet the eligibility requirements of your employer’s plan.

There still could be circumstances and plans under which your adopted child would not be eligible for medical coverage or would be subject to an exclusion of coverage for a preexisting condition. For example, if you adopted a child at a time when you were not eligible to elect coverage under an employer’s medical plan, any preexisting condition clause could still be applicable. Similarly, if you changed jobs, any preexisting condition clause in your new employer’s medical plan would also apply to adopted children: the plan need not provide coverage to adopted children that is better than the coverage provided to other children.

The new law is contained in Section 609 of the Employee Retirement Income Security Act of 1974 (ERISA), and became effective immediately, on August 10, 1993, the date the President signed it into law. The law should be equally applicable to children adopted or place prior to the August 10 effective date.

Mike Melbinger is the partner in charge of the Employee Benefits and Executive Compensation Group of the national law firm of Schiff, Hardin & Waite, 7200 Sears Tower, Chicago, Illinois 60606

In her book, The Unofficial Guide to Adopting a Child, author and adoptive mother Andrea Della Vecchio, gives suggestions for affording adoption. She encourages prospective parents to be creative in finding ways to afford an adoption and also reminds us that the cost of an adoption is expensive, but spread out over the course of a year or more.

1. Borrow Money From Yourself
   • Borrow money from your savings account
   • Borrow money from your own stocks, bonds, or 401k plan
2. Borrow Money From a Bank
   • Look into bank Adoption Loans (they do exists!)
   • Take out a Home Equity Loan
     (Benefits of a Home Equity Loan: usually low interest, tax deductible, often provided with a checkbook to write checks towards adoption expenses, interest is paid on the balance and as the balance decreases to does the interest).
3. Borrow Money From A Credit Card
   • Credit card companies have created credit cards with little to no interest that are available for adoptive families in the process of adoption.
   • Use good judgment when putting expense on a credit card, even one with little or no interest. If this is the best option for your family have a well established payment plan set.
4. Borrow Money From a Family Member
   • Family members such as parents may be willing to demonstrate support for your adoption through financial assistance. This may be in the form of a gift or loan. If borrowing money from family members make sure to put into writing the agreement.
5. Raising the Money
   • With a bit of creativity and hard work money can be raised towards adoption costs. Author Andrea Della Vecchio suggests selling something that you own, asking your church to sponsor your child, asking extended family to sponsor your child in lou of gifts, making crafts and selling them at local markets, and holding a variety show with volunteer performers. See Fundraising For Your Adoption for more creative money making ideas!
6. Saving the Money
   • Begin by taking your current income and taking out of this money all the money that would be spent each pay period on expenses related to your child, such as day care if needed. This will not only demonstrate the cost of child rearing, but in the meantime will save a good amount of money toward adoption expenses.
7. Using Employer and Military Benefits
   • Find out if your employer offers an adoptive benefit. There are companies which offer an average of $2000 towards adoption costs.
   • The military will reimburse $2000 per child (up to $5000) towards adoption expense each year after an adoption is finalized.

In addition to these suggestions there are numerous adoption grants available through helping organizations that have a mission to see children adopted by their forever families. At times organizations required an application fee to apply for an adoption grants, however, not all require this fee (estimated at $10-$20). To see a listing of some of organizations providing adoption grants go to the Adoption Interactive Learning and Financial Center and click on Adoption Financing.

Some information from this article was taken from:
The Unofficial Guide to Adopting a Child
Author: Andrea Della Vecchio
Wiley Publishing Hoboken, NJ 2000

In addition to the expenses that the adoption itself brings, there are additional expenses to consider when adopting a child. These should in no way be barriers to adoption, as they are part of child raising. These possible expenses should be thought about and planned for to prepare families for the future.

1. Children need medical health insurance coverage. Before a home study can be completed in many states proof of insurance is necessary. Will this increase the cost of your health insurance plan?
2. Does your current living situation leave enough room for the addition of a new child? If it does not and the plan is to relocate consider this financial commitment into the family budget with forethought and preparation.
3. It is very important for children to safely fit into the vehicles with car seats, booster seats, and seat belts. Does your family car fit each member of the household safely? If not, this is a good time to revaluate your family’s transportation needs.
4. The addition of a child will change the family finances. A smart move toward preparation would be to begin planning for this change before the adoption is final.
5. Will you or your spouse need to take additional time off of work in order to be home with your new child? If so, advance preparation in saving benefit time, learning about your employers FMLA leave program, and saving financially for any drastic employment changes are in order.
6. If your new child will be in day care this is an expense that should be planned for in advance.
7. If you do not already carry life and disability insurance this may be an important step to research. Life and disability insurance can provide financially for your child in case of unforeseen circumstances.

As with life in general there are unexpected financial needs that families face after an adoption. The wise move is to consider what these might be, understand your finances, and make wise and informed decisions with spending, saving, and investing. Talk with other parents about the financial changes that occur after adding a child. What costs does a new infant accrue? A toddler? A teenager? Use resources such as friends, family, books, and trusted Internet guides to assist in preparing financially for the adoption and all the days to come after.

Resources:
The Unofficial Guide to Adopting a Child
Andrea Della Vecchio, MA, M.Ed.
Wiley Publishing, Inc. Hoboken, NJ 2000

One of the most commonly made statements about adoption is how expensive it is. Adoption is expensive! There is no argument that it is not. There are ways in which adoption can be done with reduced expenses as long as prospective parents are willing to do a little research and put some elbow grease into the venture.

Adoption is expensive for several reasons. Yes, there is some bureaucracy within adoption and often it can seem as though the price of paper must have gone through the roof. Consider, however, that somewhere in a little orphanage is a child awaiting adoption. It is very possible, particularly, for agency fees that much of the money goes toward supplying shelter, food, medical services, play equipments, clothing, and education to that child. It is good to remember when thinking of the expense of adoption that some of the money spent will go directly to the benefit of the child you are adopting.

Once prospective adoptive parents have chosen an accredited adoption agency and a country from which they are adopting the cost of the adoption will be easier to estimate. At this point the agency fees, home study fee, country fees and various other costs will be laid out for the prospective adoption parents to view and plan for. The cost of adoption is spread out over the course of the entire adoption making the financial commitment more manageable.

In addition the United States has the Adoption Tax Credit, which is of great financial benefit to adoptive families. The Adoption Tax Credit allows adoptive parents to deduct dollar for dollar all qualifying adoption expenses from owed federal income taxes. There are a small amount of adoption grants that can be applied for as well. Many of the grants offer several hundred to several thousand dollars to parents in the process of adoption. Private grants are available, however, should not be counted on as the main source of funding an adoption. Most grant programs require an application fee and can only given funding to a small percent of applicants. Those parents adopting a waiting or special needs child have a higher chance of receiving a grant to assist in the adoption costs.

Prospective adoptive parents needing to further reduce costs should consider opening their homes to a waiting (older) child, child with special needs, or adopting from the United States Foster Care system. Parents that do not have their heart set on an infant or those that have the ability to care for a child with special needs will find that there are an abundance of precious children in need of a loving and permanent family. Adopting a child that is older or has special needs has been a wonderful lifelong experience of love for many adoptive families.

Adoptive parents have been incredibly creative in finding ways to fund their adoptions. The popular saying, “if there is a will there is a way” has been the motto of many adoptive parents who feel a call to adoption but do not necessarily have the bank account to support that calling.
Here are some suggestions that prospective adoptive parents have done in order to raise money for their adoptions:

1. Garage Sale

   Families can advertise a garage sale in their local newspaper. Fellow garage sale junkies tend to shop on Thursday, Friday, and Saturday mornings. The earlier the garage sale the better! In the newspaper advertisement, which in general is under $25.00 to print, a family can let possible shoppers know of all the nifty items they have for sale. It is recommended that at the garage sale families have a sign advertising that the garage sale will benefit their adoption. A bake sale with cookies and brownies, coffee, and tea is not a bad addition to this either. Remember to play background music, be friendly, and take this good opportunity to connect with people in your community.

2. Adoption Community Sale

   An adoption sale is like a typical garage sale on steroids. This can be accomplished in several ways. If adoptive parents know other prospective adoptive families they can combine resources and host a garage sale in a public place such as a church. Friends, family, and fellow church member can donate items to the sale. This is a great excuse for people to clear out their unneeded items. If possible, persons that want to donate can drop off their items at the location of the sale or be given the option to have their items picked up. This will help attain donations from people who lack time or physical ability to bring their items to the sale location. The sale is set up so that it works for the space provided. Again, music and creating an atmosphere that is relaxing and fun is a great way encourage shopping. The advertisement in the newspaper should state the sale will benefit the adoption of several children in the community. At the sale, in order to make some extra income, local retailers can donate items that can be raffled off. This is also another great avenue to host a bake sale for hungry shoppers! The profit of the sale is then split between participating families. This option is hard work, but a fun way to connect with other adoptive families and raise money. In addition, it positively promotes adoption within the community.

3. Support Letters

   Prospective adoptive families can create a packet of information about adoption, the country they are adopting from, and their adoption needs. The packet can be created to have some neat graphics and even photographs of the child’s country of origin. Many people have relatives and friends who would enjoy supporting adoption through contributing some funding. This packet or letter can be sent to these people to not only announce the adoption but to ask for financial support as well.

4. Internet Catalog/Sales

   There are a variety of organizations that have begun to assist adoptive families in fundraising. These organizations provide adoptive parents the opportunity to fundraise by selling catalog items such as candles, home interiors, kitchen supplies, cosmetics, and more. This type of fundraiser takes time in order to hand out catalogs, host parties, and fill orders. However, for a little extra time in the evening hours a lot of money could be raised to go towards adoption fees.

5. Movie Night

   Adoptive parents can invite friends over for movie and snacks. The fee cannot be charged to view the movie, but it can be charged for an evening of games and snacks. The idea is really to have fellowship and fun with friends while raising some money towards the adoption. In order to prepare for this evening the family can make a variety of fun snacks and set out games for the participants to do.

6. Christmas, Birthday, Special Events

   Those people preparing to adopt and needing to raise money can ask family members to donate money into an adoption fund rather than purchase gifts.

7. Church participation

   There are many churches that have a heart for adoption. Prospective parents can seek church participation in a variety of ways. The people within the church may be willing to provide financial support towards the adoption as a way to give and support. The church family may also be open to allowing adoptive families to hold creative fundraisers with in the church such as spending a Saturday ‘auctioned’ off to church members to help them clean up their yards or paint for a donations.

   There are endless creative ideas that people can do to raise money towards an adoption. In general, because adoption is a beautiful act of love, people are eager to support prospective adoption parents as they work to afford the adoption fees. Prospective adoptive parents should brainstorm and use their creativity towards making this very attainable dream come true!

When my husband and I decided to buy our first home we were a young married couple fresh out of college. Jason was no older than 23 years old and I a year less. We were kids and the thought of dishing out an amount of money that had never near graced our bank account was intimidating to say the least. Through discussion with the bank we learned about the process of buying a house and we learned about programs that made home buying easier. This took the financial decision and broke it down into a reasonable amount that we could manage. Like many young couples we succeeded in buying a house and learned to take the mortgage payments and incorporate them into our monthly budget. When people choose to adopt a child domestically or internationally it can cost upwards of several thousand dollars. Just as in buying a home, however, the adoption process has a time frame for payments and programs to make the financial commitment affordable. Adoption is affordable and the more prospective parents learn about the process the less intimidating and unattainable it becomes.

What is the Cost of an Adoption?

The cost of an adoption will vary depending on several factors. International
adoptions tend to be more expensive than domestic adoptions. However, parents
wanting to privately adopt a healthy infant domestically will have costs that
are close to the same or higher as adopting internationally. The most
affordable adoptions would be to adopt a waiting child from the United States
Foster Care System. There are healthy children, children with special needs,
sibling sets and older children in the foster care system that are available
for adoption immediately. Choosing to adopt a child internationally is an
expensive, but manageable, choice. Each country has a different adoption fee
which range drastically in expense. This will greatly determine the exact cost
of an international adoption. In general, the information below will lay out
the cost of adoption.

The following are estimates and are subject to change. Contact your adoption
agency for exact costs.

Application Fee- $0-$300
Processing Fee- $1000-$5000
Country Costs -$3000-$20,000
USCIS I-600A -$545
Fingerprinting $70 per person in household, plus an estimated $15 per person for
state and FBI fingerprint processing
Escort/Travel Costs- Depend greatly on where/when parents or escorts are
traveling
Home study Fee-$500-$3000
State and Federal Notary Verification -$25

Post Office (stamps, sending certified mail, envelopes)- $35
Post Placement Visit Costs- (Often included in home study fee) $100-$350 each

It is very hard to decided how much an adoption would cost based on the
estimates since they range from lows to highs with a wide gap in between.
Countries that tend to have a lower country fee for adoption are countries such
as Kenya, Liberia, Thailand, and Ethiopia. Adoption from countries such as
China, Guatemala, and Russia are higher in cost.

There are numerous myths concerning the financial state that a person or family
must be in before they can adopt. These myths keep many prospective parents
from pursuing adoption. For example, it is not important to own your own home
before you can adopt. Each year many children are adopted into families that
rent rather than own. Another popular myth is that in order to adopt you must
be rich. Frankly, a moderate income is important in order to adopt. However,
the adoption agency and home study agency are more concerned with how families
manage the resources they have. They are not so much concerned with how many
resources a family has. A person or family may have a mortgage, car payments,
even school loans remaining and still adopt as long as those other debts are
being managed and paid for appropriately.

When deciding if this is the time financially to pursue an adoption there are
several things to keep in mind.

1. There are many adoption agencies that have a sliding scale system. They
   charge the processing fee conservatively based upon the income of the
   prospective parents.
2. Most adoption agencies have a payment schedule for the fees and costs. When
   adopting you do not pay for the adoption up-front, rather the cost is spread
   out over the course of the entire adoption process.
3. There are grants and subsidies available for prospective parents who are
   willing to do some work to find them and apply for them. Each state offers
   subsides to adoptive parents.
4. In 1994 Congress approved the Adoption Tax Credit which is a great benefit
   for adoptive families.
5. Many companies offer adoption benefits to their employees. Ask your employer
   if this is something that they do (if not- tell them they should!)
6. There are several no interest credit cards and very low interest loans
   offered to adoptive parents.
7. Creative fund-raisers may be done to raise money for your adoption.

In the end an adoption may require some sacrifice. Is it possible that your
family can take the money that would have been spent on a new vehicle and
postpone this for a year? If you live in a dual income house hold would it be
possible to take ½ of one parents income and put this into a high interest
yielding savings account? This money could become the official adoption money
and in the mean time your family learns to live beautifully off of a smaller
income. In most cases, families learn that this can actually be done with a
greater ease that what it may seem. We do not usually need all of the things
that we think we do! Can you put some time and energy into fund-raisers that
will pay for some of the smaller costs of the adoption? Take a look at the
adoption program that you are interested in. Calculate the cost and try to
imagine paying for this cost over the course of a year on a no-interest or low
interest loan. Is this something that you can indeed fit into your monthly
budget?

Adoption is expensive, however, when compared to many expensive things bought
everyday an adoption is a reasonably priced investment in a life that will
forever be changed. If you desire to be adoptive parents but are not able
to invest this large of a sum please consider adopting a child through the
United States Foster Care System. Parents may call their local Department of
Child and Family Services. Adopting a child through this system has little to
no cost and will give stability and a loving home to an American child.

Hold near and dear to your heart one other suggestion. Taking care of the widows
and orphans was mandated by God for his people to do. Adopting a child is
expensive, sometimes even with the benefits provided. The same God that
mandated that we take care of the widows and orphans will be your provision
during the adoption journey. Among all of the little logical steps that you
take towards financing your adoption remember to trust in the provision of the
Lord.

June 7th 2001, President Bush signed into a law that increased the Adoption Tax Credit from $5,000 to $10,630 (per child, not per year). Income limits are also increased from $75,000 to $150,000. This is to encourage families to adopt and provide financial guidance for the adoption.

What is Adoption Tax Credit?

The Adoption Tax Credit provides financial guidance to adoptive families. By doing so, adoptive families are able to deduct dollar for dollar, qualifying adoption expenses from federal income taxes they owe.

What is Qualifying Adoption Expenses?

Qualifying Adoption Expenses is any expense directly related to the legal adoption of an eligible child. An eligible child in accordance to the Adoption Tax Credit must be under the age of 18 years or physically and/or mentally incompetent of caring for oneself. A spouse’s child cannot be considered eligible. The tax credit expenses can only be claimed after finalization for international adoptions. For domestic adoptions, even if the adoption does not go through, the credit expenses can be applied. According to the IRS, “ Qualifying adoption expenses are reasonable and necessary adoption fees, court costs, attorney fees, traveling expenses (including meals and lodging) and other expense related to, and whose principal is for, the legal adoption of an eligible child.”

International Adoptions fees

Adoption agency fees in regards with international adoptions may require fees from the agency or organization in the child’s birth country and to a U.S. agency. Training workshops or counseling may have separate charges in certain agencies. Internationally adopting may have court/legal costs and attorney fees in the U.S. and the child’s birth country. By keeping a careful record and receipts for all traveling in relation with the adoption will most likely be accepted by the IRS as qualifying expenses. This may include: traveling to the child’s birth country or adoption agency for interviews, counseling, and training. Meals and hotels can also be accepted along with other expenses directly related to the legal adoption of an eligible child.

How do people claim this credit?

1. Complete Form 8839 (PDF), Qualified Adoption Expenses. (It will include payments or reimbursements you may have received from Employer Adoption Assistance Benefits, expenses covered by adoption tax credit, child’s social security or Tax ID number which is required for filing.)
2. Attach Form 8839 to Form 1040 (PDF) or Form 1040A (PDF)
3. Report the credit on line 52 of Form 1040 or line 34 of Form 1040A.
4. Contact your local IRS office if you need additional assistance and tax advisor to make sure you have not overlooked anything.

Additional Forms…

• Form 8839 – for itemizing qualifying adoption-related expenses.
• Form SS-5 – to apply for a Social Security Number for your child.
• Form W-7 – to apply for an Individual Taxpayer ID Number (ITIN) if your child is a resident or non-resident alien who does not qualify for an SSN.
• Form W-7A – to apply for an ‘Adoption Taxpayer ID Number (ATIN) if you are in the process of adopting a US citizen or resident, and cannot get an SSN until the adoption is final.

Expenses that is ‘nonqualifying’ according to IRS…

1. Surrogate Parenting arrangements which includes paying hospital and medical costs.
2. Using funds received from local, state or federal programs
3. If one is paid or reimbursed by your employer
4. Income Exclusion which is the amount that can be deducted from your own taxable income which reduces the amount of owing federal income tax.

Resources used in preparing this article:
http://tax-credit.adoption.com/
http://www.irs.gov/taxtopics/tc607.html