LGBT Adoption: The Financial Guide
Seven financial questions LGBT people should ask before adopting
|Written by Tom Yeung, CFA | CDFA
Investment Advisor & Fund Manager, Jurnex Financial Advisors
As a financial advisor, people often ask me about LGBT adoption.
That’s because adopting a kid is also one of the most important financial decisions you will make in your life. Not only do you have to consider your emotional readiness for adopting a kid. You also have to consider how things will line up financially too.
But where do you even begin? There’s so much information out there, and it’s difficult to know what to expect when you’re adopting a kid.
That’s why I recommend people always talk to a qualified investment pro before adopting a kid. Raising a child is such a significant financial decision; you want to make sure you have your bases covered. But to get you started, here is the Jurnex Guide to LGBT Adoption. In this article, we’ll cover the basics of LGBT adoption, as well as the seven critical financial questions to ask.
What is LGBT Adoption
LGBT adoption is when gay, lesbian, or transgender individuals or families decide to adopt a child.
If you’re an LGBT family looking to adopt, you’re in good company. In the United States, nearly half of LGBT women and one-fifth of LGBT men are raising a child under age 18. Same-sex couples are four times more likely to adopt than opposite-sex couples.
Why is LGBT Adoption Different?
The US federal government legalized same-sex marriage in 2015. But gay, lesbian, and transgender people still face a broad range of discriminatory laws and practices.
Discrimination against LGBT adoption
According to the surveys, only one in five adoption centers actively reaches out to LGBT families.
Even more disturbing, the ABA (American Bar Association) adopted a resolution in 2019 that slammed recent legislation that restricts LGBTQ access to foster care and adoption services.
“State-sanctioned discrimination against LGBT individuals who wish to raise children has dramatically increased in recent years.” – American Bar Association
Ten states have passed laws that allow state-licensed child welfare agencies to refuse to work with families who “conflicts with the agency’s religious or moral beliefs.
- North Dakota
- South Dakota
- South Carolina
These laws disproportionately affect LGBT families because LGBT individuals are far more likely to adult and foster children. According to the Williams Institute, 21.4% of same-sex couples raise children, compared to just 3% of opposite-sex couples.
LGBT adoption financial considerations
LGBT people also need to contend with financial considerations
- Wage gap. The LGBT wage gap is both well-documented and unrelenting. Even if their peers can afford it, LGBT parents must consider their finances independently.
- Parental leave. Federal law only provides 12 weeks of parental leave for new parents. Additional time off is at the discretion of the employer. Only 80% of Fortune 500 companies now have similar benefits for domestic partners, and many smaller companies are even worse.
- Leaving the workforce. Many LGBT couples make similar incomes, making it difficult to decide who should leave the workforce and become a stay-at-home parent.
Should you consider LGBT adoption?
But don’t let the laws scare you off. If you are both emotionally and financially prepared to adopt a child, I strongly urge you to follow your instincts.
That’s because the numerous LGBT parents I’ve met in my life all agree on one thing. Their adopted child has always brought joy, happiness, and fulfillment to their lives. For families that are both financially and emotionally prepared, I have never heard a story of regret. That’s because if you have a clear plan in place, things become far easier to manage.
Once you answer the question of “CAN I afford to adopt,” the question of “SHOULD I adopt” will solve itself.
Not only that. The US Children’s Bureau estimates that 126,000 children are available to be adopted from foster care. Even an individual contribution by you will go a long way to helping a child find the right home.
How much does LGBT adoption cost?
According to Fidelity, the average child costs $233,000 to raise to age 18. Around half of that comes from having to move to a larger home. Private school and college can add $400,000 if you’re paying entirely out-of-pocket.
Do you have $20,000 per year to spare?
Keep in mind that these numbers are just averages. The typical LGBT family tends to live in major cities, which raises the cost of childcare. In my experience, you can expect childcare costs to average closer to $20,000 per year.
Do you have enough for adoption costs?
According to American Adoptions, it costs an average of $43,000 to adopt a child.
While this number may seem high, keep in mind that it also includes fees to help the adoption agencies run.
And unlike biological births, which are generally covered by insurance, adoption costs have to be paid out of pocket.
Should you hire a financial advisor?
It’s generally a good idea to talk to a financial advisor before moving forward with an adoption. Not only will it make sure you can provide financially for your new family.
It’s also because adoption agencies are required to perform financial studies of you and your family before approving the adoption.
Even if you can afford a child, having a demonstrated financial plan will make the process far easier when you’re looking to adopt a child.
LGBT Adoptions: The seven financial questions to ask
Now that we’ve covered the basics of LGBT adoption, here are the seven crucial questions to ask before you move forward.
1. What are your state’s applicable laws?
LGBT adoption laws can make it impossible for same-sex couples to adopt in their home state. If that’s the case, you may have to consider doing so out of state or internationally. Adopting non-locally adds cost to your adoption process because you’ll need additional approval through the ICPC (Interstate Compact on the Placement of Children).
2. Are you adopting together or separately?
To avoid discriminatory adoption laws, many LGBT couples turn to single-parent adoption, where only one of the parties adopts the child.
Once one parent has adopted a child, there are three options the couple can take.
- Second parent adoption. The other spouse can adopt the child without breaking the first parent’s rights.
- Step-parent adoption. If the parents are married, both spouses can have a legally binding relationship with the child.
- One parent maintains custody. Some LGBT couples decide it’s easier to keep single-custody than to navigate adoption laws.
There are several financial considerations to make.
If you decide on second-parent or single-parent adoptions, you should talk to an advisor to ensure assets are titled correctly. So if anything happens to you or your spouse, assets will transfer to the correct person.
Otherwise, you may find your money going to next of kin, which is often your blood relatives.
Step-parent adoption can also be tricky. Several state cases have ruled against same-sex couples, and so legal counsel is likely necessary.
3. Are you financially ready?
Besides having an additional $20,000 of income plus $43,000 for adoption fees, there are other considerations you also have to make.
Do you have enough saved away?
I recommend any parents looking to adopt to have at least three to six months of emergency cash. That’s because when you take in a child, you have far less information about their health and background than with a biological child.
Do you have enough surplus income?
Similarly, you need enough income to cover unexpected expenses. Many children from foster care also need additional resources, such as private schooling and counseling. So having surplus income will help smooth over any bumps in the road.
Does your family have a stable income?
LGBT families are typically dual-income. That can provide stability, but it also means it’s easy to become complacent about managing risk. So before you adopt, make sure you can count on both of your incomes.
4. Will your income change?
Because federal law only mandates 12 weeks of unpaid parental leave, many LGBT people decide to work part-time or leave the workforce entirely to care for their child.
From a financial perspective, the decision to leave the workforce comes at a high economic cost. That’s because you’re forgoing wages you could have earned. In the world of economics, that’s known as an “opportunity cost.”
You would think an individual earning $100,000 per year will forego at least $1.8 million over 18 years of parenthood. In actuality, the number is closer to $2.5 million once you factor in wage growth and compound interest on savings.
5. Will you have to move?
Many adopted parents decide to move locally after adopting a child. the most common reasons include
- House size. Growing families typically need more space.
- School district. The quality of local schools becomes a critical part of your living situation.
- Environment. Many LGBT families congregate in cities for work. Once you adopt a child, there’s a stronger incentive to move to a quieter, safer neighborhood
Relocating, however, can add costs to raising a child. It can also change your tax base if you are moving county or state. In the DC area, many families are surprised at their real estate tax rate more than quadrupling from 0.5% in central DC to 2.4% in nearby suburban Maryland.
6. Will you change the way you manage finances?
Many LGBT families have unusual financial sharing plans. Many couples who have lived most of their lives together often don’t share finances. Others share finances but live out of different bank accounts.
Adopting a child can mean significant changes in the way you manage money. The addition of many shared expenses, including childcare and tuition, could mean rethinking the way you split finances.
And even if you are married and share all finances, adopting a child raises the question of who will be the decision-maker when it comes to approving purchases. For instance, who decides if you can afford private school?
Here is where a smart financial advisor can help. By having a better idea of personal finances, it means you can concentrate on the critical aspect of spending quality time with your child.
7. Will you adopt or foster?
With LGBT adoption, it’s crucial to know whether you’re adopting or fostering.
That’s because the cost of fostering children is far less than the cost of adopting. Where adoption fees run around $43,000, the cost of fostering a child average just $2,800.
The cost of fostering a child is also generally less.
- Tuition. There are several programs to help foster children pay for private school and college.
- Financial aid. Many US programs exist to help fund foster families
- Fewer years of dependency. Children in foster care tend to be older and will become financially independent far sooner
There are a number of programs foster parents qualify for. Read the full list here.
However, fostering children can also bring unexpected costs. Many children in the foster care system require ongoing therapy because of childhood trauma. Studies have shown that foster children often have more significant physical issues as well due to early life experiences.
LGBT Adoption: Are you financially prepared?
It surprises most people to learn that the decision to adopt often ends up being a financial decision rather than an emotional one. That’s because, by the time you’re talking about adoption, you’ve already made the spiritual decision. All that remains is understanding whether you can afford it.
Even the question of whether you should become a stay-at-home parent becomes an entirely financial question once you scrutinize the issue. Imagine having an infinite source of passive income. Your decision to adopt would probably be far more relaxed.
And if this seems like a lot of information, don’t worry. The good news is you don’t have to do this alone. Consider talking to an LGBT investment advisor about your adoption plans today. These are advisors who have experience in helping LGBT individuals and families navigate finances.
Where to find more resources
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