Tracy and Alfredo were raising one child and dearly wanted to add to their family. But with infertility issues standing in the way, the Albany, California, couple chose to adopt through an agency.
Roughly one year later, daughter Olivia (now 20 months old) came home — along with $30,000 in adoption expenses.
Happily, a proactive approach to dealing with the cost made the hefty price tag somewhat easier to handle.
“We started saving money right after we went to the introductory adoption class,” explained Tracy, 40, who asked that her last name not be used for privacy. “It took us about a year. We had already been through a debt-reduction program, and we didn’t want to rack up that kind of debt again.”
With costs routinely stretching into tens of thousands of dollars, prospective parents need to be aware not only of the enormous expense they’re facing but strategies to make their dreams of a family financially realistic.
“Looking back on it, the only other thing you might spend as much money on is when you buy a home,” Tracy said. "But this was really important to our family."
Popular and expensive
Americans adopt more than 100,000 children every year, reports the Child Welfare Information Gateway, an information clearinghouse and resource sponsored by the federal Department of Health and Human Services.
Although a number of avenues are available — such as international adoptions and older children in foster care — many prospective parents choose to work with an adoption agency or opt for private adoption, through which birth parents relinquish rights to a child directly to the adoptive parents rather than to an intermediary organization or agency.
Whether private or via an agency, the speed with which such adoptions can be finalized — often as quickly as a couple of months or even faster — is a major draw. But that advantage comes at a price.
“It can be quicker, but a lot more expensive,” said Nicole Witt of The Adoption Consultancy, a domestic adoption agency in Brandon, Florida. “The cost can easily run $40,000 and even more. It’s a trade-off of cost and time.”
An adoption checklist helps explain the substantial expense:
• The costs of any adoption organization that may be involved. These can include fees for birth-parent counseling, birthing expenses, post-placement supervision until the adoption is finalized and agency overhead and operating expenses. For Tracy and Alfredo, their bill from the Adoption Connection was $17,239.
• Legal representation. In private adoptions, adoptive parents commonly pay for their own attorney as well as legal counsel for the birth parents.
• A home study — a legally mandated evaluation of the adopting family, home and surrounding environment — can add a couple thousand dollars to the bill.
• Tack on any travel costs, medical expenses and a host of other possible charges — such as building and hosting a website to attract the attention of birth parents — and the total piles up quickly.
“Many hear about the estimated cost and say, ‘Holy cow, I never expected anything like that,’” said Joan Jaeger of The Cradle, an Evanston, Illinois, adoption agency. “Give the emotional expense of the adoption process itself, many people hear that cost and decide to look at a different kind of adoption.”
Other ways to pay
When considering various types of adoption, don't assume that alternatives to private, domestic adoption are cost-free. For instance, international adoptions can easily run into the tens of thousands of dollars. The difference is the source of the expense — for instance, international adoptions can involve expensive travel and, in many cases, would-be adoptive parents must remain in certain countries for several months before an adoption can proceed.
Although foster-care adoption is generally considered the least expensive, there can be expenses for medical or psychological evaluations that may be necessary for adopting a child with special needs. Newborn adoptions through nonprofits, such as religious-based organizations, will generally cost between $10,000 and $25,000 (although many offer financing assistance that may trim the overall bill).
Because of the cost, said Witt, it’s valuable to start thinking about and addressing the financial impact of adoption well before actually beginning the process. For instance, a couple having trouble conceiving a child on their own may want to think about starting to set aside funds for adoption — even before embarking on any sort of infertility treatments.
“They should really start thinking about it before adoption becomes their only alternative,” said Witt. “If nothing else, that may help them make decisions as to whether they want to try any medical treatments or not.”
In addition to setting aside savings for adoption, other financial sources can come into play. One of the most generous is the adoption tax credit. For 2015, the IRS gives adoptive parents a maximum tax credit of $13,400 per child to offset expenses such as legal fees and travel costs.
The credit begins to phase out for annual incomes in the neighborhood of $200,000 a year. Check with a tax professional for more specifics and other particulars, such as adopting more than one child or the financial aftereffects if an adoption falls through.
Other resources to consider include the following:
• Adoption grant and loan programs. For example, helpusadopt.org provides grants of up to $15,000 to help families with adoption expenses. An application is required and grants are awarded twice a year. By contrast, other agencies and programs offer low-cost loans to offset adoption costs. For more information on a number of loan, grant and other funding programs, go to adoptionassociates.net.
• Employee benefits. A number of companies provide financial assistance to employees dealing with adoption expenses: “Some have reimbursements of up to $10,000 in expenses,” said Jaeger. Others are particularly generous with employee leave policies. Check with your company’s human resources department to see what’s available.
• Using the home. Home equity loans and lines of credit allow homeowners to tap into equity built up in their property. Such funding sources can be set up quickly, at a modest expense and with attractive interest rates (as of early March, the average interest rate for home equity lines of credit nationally was 4.72 percent, according to bankrate.com). Would-be adoptive parents with extra space in their home can also rent out a room to raise funds.
• Family help. Ask family members for contributions toward your adoption plans. Families can arrange fundraising events, often in partnership with a church or some other community organization.
• Go digital. Even 21st-century technological trends can lend a hand. Some families have turned to online crowdfunding to raise money for adoption expenses. For the uninitiated, crowdfunding — offered via any number of Internet sites — lets people know about projects, business ideas and other activities and solicits contributions for funding.
No matter which resources work best, Witt said, it's critical to look at the finances of the decision and the long-term impact of the decision.
“You have to be realistic about your finances,” added Witt. “Is the cost of adoption going to impact your ability to raise a child as you’d want to?”
Jeff Wuorio lives in Southern Maine, where he covers personal finance and entrepreneurship. He may be reached at email@example.com, and his website is at jeffwuorio.com.