Subsidized Adoption: A source of help for Children with Special Needs and Their...

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Subsidized Adoption: A Source of Help for Children with Special Needs and Their Families

December 2002

In every State there are children with special needs waiting for adoptive families. In the past, most of these children would wait forever. The costs of care and services were major obstacles to parents who would otherwise adopt and love them. Adoption subsidies, also known as adoption assistance, remove the obstacles of the past. Financial help and services are now available for children with special needs and their adoptive parents.

There are two major sources of adoption assistance: the Federal Title IV-E program under the Social Security Act and the States' programs which vary State by State. Each State's program is different and it is very important for families interested in obtaining adoption subsidies to contact their local department of social services to determine what is available in their State. The information presented below is divided under each question into sections on the Federal IV-E program and the State programs.

What Kind of Financial Help Is Available?

Federal IV-E Adoption Assistance Program

Under the Federal Title IV-E adoption assistance program, payments to the parents of an eligible child are available for the ordinary and special needs of the child. Such payments are not designated for a specific purpose such as medical expenses, maintenance (that is, living expenses), or special services. The funds may be used for any identifiable need of the child. The maximum payment may not exceed the amount that would have been paid for maintenance for that child if he were in a foster home.

A child for whom Title IV-E adoption assistance is provided is automatically eligible for medical assistance under Title XIX (Medicaid) and for social services under the Title XX plan in each State, as though he were an Aid to Families with Dependent Children (AFDC) recipient.

Payments can continue until the child reaches age 18, or until age 21 if the State determines continuation is warranted, and they continue in the event the family moves to another State.

Adopting parents do not have to meet any financial eligibility criteria in order to receive adoption assistance for the Title IV-E eligible child. That decision would not interfere with the child's eligibility for Medicaid or Title XX services, or the parents' eligibility for reimbursement of non-recurring adoption services.

In order for a child to be eligible for Title IV-E Adoption Assistance, he or she must have been eligible for AFDC or Supplemental Security Income (SSI) programs under the Social Security Act before adoption.

State Adoption Subsidy Programs
State adoption subsidy programs provide assistance for children who are not eligible under the Federal IV-E program. Adoption subsidies take various forms in the different States, depending upon the child's needs and the State agency's program.

Under the State-funded programs, there are generally three types of adoption subsidies:

*maintenance, and
*special services

Medical subsidies cover some or all the costs related to a child's specific medical condition that are not covered by the family's health insurance, as well as associated therapy, rehabilitation, and special education. Some States provide medical assistance through Medicaid which also covers health care needs not covered by the adopting family's health insurance policy.

Maintenance or support subsidies are direct payments to the adopting family to help cover the child's living expenses.

Special service subsidies are usually one-time payments to cover a child's emergency or extraordinary need; less often, they are repeated payments for services not covered by the medical or maintenance subsidies. It is important to check with the State to determine what is an allowable cost.

Under both Federal and State programs, adoptive parents of a child with special needs are eligible for a one-time payment of non-recurring adoption expenses incurred in connection with adoption. Such expenses include reasonable and necessary adoption fees, court costs, attorney fees, and other expenses directly related to the legal adoption of the child with special needs.

How Does the Adopting Family's Financial Status Affect the Subsidy?

Federal IV-E Program

Federal law does not require the financial status of the adoptive parents to be factor in determining the child's eligibility for adoption subsidy under Title IV-E. However, State agencies take into account the parent's circumstances and the needs of the child when establishing the subsidy amount under the Federal program. The State agency and adopting parents enter into an adoption assistance agreement that specifies the amount of payment (if any) and other services available. The specific terms of the agreement may be readjusted with concurrence of the adopting parents, as the child's needs change, the State agency's foster care maintenance payments change, or the parents' circumstances change.

State Adoption Subsidy Programs

For State-funded subsidies, some States have income/means tests for prospective adoptive parents that determine how much a family may receive. The State agency reviews each child's and parent's situation at the time of the adoptive placement and usually on a yearly basis thereafter.

What If the Adopting Family Disagrees with a State Agency's Decision to Change the Type or Amount of the Child's Subsidy?

Federal IV-E Program

Adoptive parents may appeal the agency's decision by using the State's fair hearing and appeals process. Generally this means that the family files an appeal through the head of the local agency to the State Title IV-E agency. The local agency should be able to inform the family about steps in the State fair hearing process. The family may wish to be represented by an attorney in this process or seek the advice of an attorney in this process or seek the advice of advocacy organizations for children with special needs.

Adoptive parents may also consult the Program Operations Division, U.S. Children's Bureau, Administration on Children and Families, P.O. Box 1182, Washington, D.C. 20201 or (202) 205-8671 for advice on an appeal for the IV-E program.

State Adoption Subsidy Programs

States differ in their appeals processes for State adoption subsidies. Families should ask the local agency director about the existence of and steps in the State appeals process.

Are There any Federal Tax Benefits Available for Families Who Adopt a Child Eligible for Adoption Subsidies?

The adoption tax credit is available in the tax year that the adoption is finalized. In tax year 2003, a family that adopts an eligible child and has a modified adjusted gross income of less that $152,390 (up from $150,000 in 2002) may claim an adoption tax credit of up to $10,160 (up from $10,000 in 2002), depending on their expenses. To claim the credit, the family must document that they have incurred certain qualified expenses that are not reimbursed from another source. A family that otherwise meets the criteria but earns between $152,390 and $192,389 will be eligible for credit in an adjusted amount based on their income.

Beginning in tax year 2003, the law alters the criteria for a family that adopts a child with special needs only. Such a family that earns less than $152,390 may automatically claim a credit of $10,160 regardless of their actual qualified expenses. Families who earn between $152,391 - $192,389 will receive an adjusted credit based on their income, regardless of their actual expenses. Such families must still document their actual expenses and the fact that the State has determined that the child is special needs.

Adoption Benefit Exclusion

The law extends the exclusion from income for employer-provided adoption assistance, so that a family is not liable for taxes on adoption benefits provided through work. The maximum exclusion is increased to $10,160 per eligible child, including special needs children. The amount of the exclusion will be adjusted for families with incomes between $152,391 and $192,389. Beginning in 2003, families who adopt children with special needs may qualify for the exclusion regardless of their actual adoption expenses.

(This should not be considered as official guidance on tax law. Adoptive families should contact the IRS or a tax advisor for information on the tax credit or exclusion).

Who Are the Children with Special Needs?

Each State agency has its own definition of "special needs" used to identify children eligible for adoption subsidies. Generally, the child's special needs relate to age (an older child); membership in a minority group; a medical condition (e.g., chronic illness); siblings (brothers and sisters who should not be separated); or handicaps (a child with a physical, emotional, or mental disability). Some children have more than one special need; all must be legally free for adoption. Most of the children have experienced unusual stresses; some have been abused, neglected, or abandoned. Each child needs a permanent, caring family who can help him or her feel accepted, valued and wanted.

How Does a Family Apply for an Adoption Subsidy?

When it is determined that the child is "a child with special needs," the possibility of an adoption subsidy is discussed with the prospective adoptive parents. Most children registered with agencies as having special needs have already been classified as eligible for subsidies. Once a petition for adoption has been filed, a final determination of the child's eligibility under Title IV-E or the State program is made. The family applies for the subsidy to the State agency, through the local office. A determination is made and an adoption assistance agreement is signed that specifies the types of subsidy to be provided. This usually should be done before placement and must be done before finalization of the adoption. Each State has its own regulations for a State-only subsidy as well as the procedures to be followed for Title IV-E adoption assistance.

Can Foster Parents Apply to Adopt an Eligible Child?

Yes. A majority of children with special needs are adopted by their foster parents. This option is often considered by the State to be in the child's best interests because emotional ties are already established. The foster parents, following approval as adoptive parents, enter into an adoption assistance agreement with the State agency if a subsidy is requested. Foster parents can also apply to adopt a child with special needs who is not already in foster care placement with them.

What Kinds of Services Are Available for the Child and the Adopting Family?

Federal IV-E Program

Under Title IV-E, the child is eligible for any social service that is available to an AFDC-eligible child under the State's Title XX program. These services may include counseling, legal, pre- and post-adoption, information and referral or transportation services. Each State's Title XX program is different and families should check with the State agency to determine what services are available. Also, additional services may be available that are not provided by Title XX or Medicaid, but these must be specified in the adoption assistance agreement.

In the event that an adoptive family moves from one State to another, if a needed service specified in the adoption assistance agreement is not available in the new State of residence, the State making the original IV-E adoption assistance payment remains financially responsible for providing the specified service.

State Adoption Subsidy Programs

For children receiving State-only subsidies the specific services to be provided are included in the agreement.

How Do Parents Who Have Already Adopted a Child with Special Needs Feel about the Adoption Subsidy Program?

Studies show that the vast majority of parents are satisfied with the program. In one study, most parents interviewed said that they would consider adopting another child with special needs; those who said they would not cited their age or the size of their family as reasons -- not dissatisfaction with the program or the child.

Further, studies have shown that neither adopting parents nor adopted children attached a stigma to the receipt of adoption assistance. Additionally, most parents interviewed reported that the agency social worker was adequately informed about the community resources, eligibility requirements for subsidy, approval, review and recertification procedures, and legal issues on assisted adoption.

Approximately 70 percent said that more information and activities for parents after adoption would be useful, such as parent support groups.

A California study found that 90 percent of the parents indicated their overall satisfaction with the program by responding that they would definitely encourage friends interested in adopting to participate in the program.

For more information on adoption subsidy, contact:

North American Council on Adoptable Children (NACAC)
970 Raymond Avenue
Suite 106
St. Paul, MN 55114-1149

This material has been taken from the National Adoption Information Clearinghouse Web site as reviewed and approved for addition to this site on December 28, 2003.

*The National Adoption Information Clearinghouse is now known as The Child Welfare Information Gateway and can be found at or by calling 800.394.3366.

Visitor Comments (1)
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tracy - 4 years ago
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what can you do to have a special needs child subsidy over to the person who has legal custody of child from courts #1

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