Financial Planning for the Adopted Child

We went to a meeting with a financial planner last night with a ton of good information about money, savings, and sending your adopted child to college. Quite a bit of it wasn't applicable to us, but I wanted to share.

The biggest and most significant thing for us was information about the Federal Adoption Tax Credit.

• If you adopt a child with special needs from foster care (if you get adoption assistance you can assume you qualify),


• you automatically qualify for the maximum amount of the tax credit (for 2010 it's $13,170 per child!)


• without having to prove actual adoption expenses (if you adopt internationally you qualify too, but it only covers actual adoption expenses which you have to prove).


• If you didn't apply for this credit the year you finalized your adoption it's a good idea to file an amendment.


• Until 2010 this was only available as a credit for federal income tax, which rolled over every year until it was gone,


• as of 2010 you have the option of getting a REFUND if you still have credit after all your taxes are paid.

This is huge for us because even though we adopted Bear and Kitty in 2008, we didn't have any significant income for 2008 or 2009. While Hubby had an income for 2010, we should still have a substantial credit.


Sending a child adopted from foster care to college or technical school:

A big focus of this meeting was the fact that most children adopted from Texas foster care are eligible for FREE tuition and fees for an unlimited number of years of public college (provided they work with CPS to obtain a waiver form and enroll before age 25 - they don't even have to attend consecutively - they can go to grad school when they're 50!). Of course we aren't eligible for this because we didn't adopt from TX. *sigh*

If your child was in foster care on or after the 13th birthday, he or she can apply for financial aid as an independent student (meaning parents' income or assets won't count when applying for federal aid). This applies to Bear (adopted the day before his 15th birthday), but unfortunately not for Kitty since we adopted her 2 weeks before she turned 13 (I'd heard of this law, but couldn't find it and we'd delayed her adoption so long it didn't make sense to delay it for 2 more weeks - the law officially came into effect the following year).

If your child was 16 or older (unfortunately neither of mine) when adopted from foster care they are eligible for up to $5,000 in annual reimbursements or direct payments to vendors on child's behalf. This can be used for tuition, room and board, books, computer, transportation, child care, tutoring and some other expenses. Can be received up to age 23.

If your child was 16 or older when adopted and has some form of adoption assistance agreement then adoption assistance and Medicaid extends until the child is 21 (instead of stopping at 18 or 19) - as long as they are regularly attending college.



Good Ways to Pay for Your Kid's College

You need to apply annually for financial aid using the FAFSA form. This is how you document your income and assets and your child's income and assets. It's free to file.

Things have changed since my parents helped me go through college. One of the biggest things that has changed is:

It's not necessarily a good idea to put money (savings bonds, trust funds, savings accounts) in your child's name because:

• It counts against them on the FAFSA form. If you had $10K in your child's name, they might be required to pay about $2K of it towards college tuition, whereas the same amount in your name would only count for less than $600 (especially if they qualify for independent student).


• Your child has no obligations to use it for college. They could buy a car or Xbox games.


• If you need it to say, save your house, the child doesn't have to give it back.

According to the financial adviser, the best thing to invest college money in was a 529 College Saving Plan. One of the biggest advantages I saw was that you could change the beneficiary so if you had a child who decided not to go to college, or there was money left, then you could transfer it to another child.

If y'all want more info let me know.