Pride month is here once again, but this year the LGBT community is facing a lot more backlash from local governments than the year before. There are currently over 100 bills across the U.S. right now that are fighting against LGBT rights. The governor of South Dakota has gone as far as passing a law to allow state-funded adoption and foster agencies to refuse services to LGBT people, all in the name of religious liberty.
There is a growing momentum against the LGBT community that is being spearheaded by politicians, and it has unfortunately empowered many people to follow suit. Just recently there was an airline that refused to let a same-sex couple and their kids use family boarding because one employee decided that they were not a real family. The truth of the matter is that legal equality in same-sex marriage has still not translated to social equality as a whole, so it remains essential for the LGBT community to stay educated and alert on laws surrounding their rights.
In the spirit of Pride month, I’d like to highlight a few financial planning tips for LGBT people who wish to start a new family by adopting a child.
Who Can Adopt a Child?
First, it’s important to note that different states have different laws pertaining to the LGBT community and adoption. As I mentioned above, South Dakota can deny services to LGBT people altogether, so you must become fully aware of your specific state’s laws. Regardless of the state, all couples are required to become licensed to be able to adopt. In my home state of California, the laws surrounding adoption and the LGBT community encompass a variety of scenarios:
• California allows single LGBT individuals to petition to adopt.
• California permits a same-sex couple to jointly petition to adopt.
• California permits a same-sex partner to petition to adopt a partner’s child or child of the relationship.
How Much Will It Cost?
The next item off the check list to learn about is the cost of adopting a child in your state. Below is a list of expenses you are likely to incur with some specifics on what those expenses are like in California:
• Adoption Program Fee: Fee is determined by the adoption professional that you choose.
• Home Study Fee: Fee covers a review of you, your family, and your home environment. Fee is determined by the state you live in. California has its Home Study Fee set at $4500.
• Legal Fees: Fees include hiring a social worker or attorney in the birthmother’s state. The amount is determined by the state in which the birthmother lives. Legal fees in California can range from $1,000-$15,000 depending on the complexity of the adoption.
• Court Fees: Fees include those associated with legally finalizing the adoption in court.
• Travel Expenses: Usually some amount of travel is required to pick up your baby after he or she is born. Travel may also be required if you and the birth mother meet before birth. Expenses include airfare, ground transportation, lodging, and meals.
• Birthmother Expenses: As permitted by state law, you may be required to pay for some of the birthmother’s expenses, including medical fees, counseling, and lodging.
Are There Ways to Reduce Costs?
• Employer Adoption Benefit Programs: Many people have an employee benefit at their companies that allows for partial reimbursement of adoption expenses. A typical employer contribution is between $3,000 and $8,000.
• Federal Adoption Tax Credit: For 2017, the federal adoption tax credit is $13,570 per child, which may be claimed the year after incurring expenses. This is a tax refund that is put in your pocket to offset your adoption costs that are not reimbursed be an employer. Even if an adoption is not successful, you would still qualify for the tax credit. Step-parent and surrogacy expenses also do not qualify for the adoption tax credit. Note that there are income restrictions for qualifying for this tax credit, so not everyone will qualify:
$13,750 Federal Adoption Tax Credit Per Child (with Income Restrictions)
• Get full credit if Modified Adjusted Gross Income (MAGI) is equal or less than $203,540
• Get partial credit if MAGI is greater than $203,540 but less than $243,540
• No credit if MAGI is $243,540 or more
• State Adoption Tax Credit: Some states offer a tax credit for adopting a child. In California, adopting parents can expect a tax credit of $2,500 the year the adoption is finalized.
Final Steps: Be Sure to Keep a Close Record of Your Adoption
• The final adoption decree
• A placement agreement from an authorized agency
• Court documents
• A state’s determination for special-needs children, if applicable
The adoption process is not easy or cheap for any family; but depending on the state of residence, it could be particularly difficult for an LGBT family given the current political climate. This is exactly why it is important for LGBT people to equip themselves with as much information as possible and meet with an expert who specializes on helping the LGBT community. I’m a Financial Advisor and Domestic Partnership Advisor dedicated to serving my community and I’m happy to work with anyone who is seeking this specialized advice. We must keep moving forward together.
By Robert Castillo, ADPA®
Investment Advisor Representative
Robert Castillo, ADPA® is a Financial Advisor at Santa Monica, CA based Gerber Kawasaki, an independent investment advisory and wealth management firm with approximately $600 million in assets under advisement. Robert is also an accredited domestic partnership advisor and has been specializing in financial planning for LGBT same-sex and unmarried couples since 2009. To contact Robert, please email him at Robert@GerberKawasaki.com Twitter: @RCastilloLA
Disclaimer: This article contains general information and is not intended as legal or tax advice. Every case must be reviewed independently with an attorney or tax advisor.
Investment advice offered through Gerber Kawasaki Inc, a registered investment advisor.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which course of action may be appropriate for you, consult your financial advisor. No strategy assures success or protects against loss.
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