LGBTQ+ Family Financial Planning

LGBTQ+ Family Planning may be more complex, but it’s well worth it to make your family a reality. The additional time, education, planning and financial sacrifice can help you feel more prepared as you enter parenthood as these are the same skills needed as kids enter your life.  Additionally, education and planning can really be beneficial in terms of making sure you select the right path to parenthood for your family and to help you select ideal vendors and organizations to support you in your journey.

I’ll cover some of the financial logistics here to help you plan for your family. As you’re reading the costs take a deep breath and remember that you don’t have to do everything at once. Also, costs vary widely because every journey to parenthood is a bit different. I’ll also help you fill in some of the unknowns you should be prepared for before and after birth, so you have a realistic path forward.

What Path to Parenthood is Right For Me/Us?

Cost is one but not necessarily the most important factor to consider when deciding how you want to start your family. Each path to parenthood itself comes with a ride range of cost factors and potential challenges. There’s a lot to understand about upfront and costs that could come later for to each method. This is only a rough estimate of ranges to expect to bring a child into your home through each method:

Infant Adoption: $30-60,000

Adoption from Foster Care or Older Child Adoption: $3-10,000

Assisted Reproductive Technology (ART): IVF and IUI: $12-30,000 not including the donation of an embryo

ART, egg donation, and Surrogacy: $150-200,000+

Keep in mind, grants and health insurance can help with costs, but also vary widely in terms of availability. Also, there’s a Federal Tax Credit available for adoption expenses of up to about $17k. Please discuss this with a tax advisor, however.

How should I plan for big expenses like housing, vehicles and consumer items?

Life will be different for you once you’re parents but try not to let anxiety about the unknown cause you to overspend and create financial stress on top of normal stress. You will see friends upgrading their homes and cars and endless marketing of gadgets and household items. Take a deep breath and make sure to consider the cost of big-ticket items in your budget before making a commitment. Often new LGBTQ+ families are paying student loans, building a nest egg and retirement savings, paying off expenses and loans from IVF or adoption, and starting their kids in daycare in the period right before or after bringing children into their homes. Do you also have to buy a bigger car to “fit car seats” or buy the home in your ideal school district at the same time? Often these bigger ticket items add unnecessary stress at an already expensive time. The cost of childcare alone is a major stressor by itself. Try to assess what’s right for your family and your budget in this time.

How can I protect my family LGBTQ+ family?

It’s important to consider ways to protect your family from things that can go wrong. Even for younger new parents in their 20s and 30s it’s important to make sure that your partner, co-parent and children have a financial safety net if “life happens”

Disability Insurance: Most employers offer Long-term disability insurance. Make sure you’ve opted in. If your employer doesn’t offer this insurance request it from HR. Ideally you want a plan that covers 60% of your income. If you’re self-employed you can search for a policy from an insurance broker. This insurance is very important to protect your family’s income in the event you become ill or injured and are unable to work.

Life Insurance: While many employers offer Life insurance, coverage amounts are not ideal to replace the income of a parent that dies. 1-2 years of salary help but think for a moment about how life might look for your spouse if you passed away. They would be grieving, taking care of children and still need to work. We recommend something closer to at least 10-20 years+ of salary. These amounts would help your family to maintain a home, grieve, provide for college, etc.  This is really an area where it’s best to consult a financial advisor or insurance broker to determine what’s right for your family.

Adoptions are essential for any parent that is not named on a birth certificate. Don’t leave it to chance even if you’re married. You don’t know how a judge might rule for guardianship in a case where a surviving spouse/partner is not documented as a legal parent.

Estate Planning:

Estate Planning is always an important tool for protection but is critical for same sex couples with on and off again threats to same-sex marriage. Before same sex marriages were legal, LGBTQ+ couples used estate planning to ensure that spouses and chosen family were the designated beneficiaries of their estates. Similarly, it’s important to use this tool as a backstop in the event same sex marriages were ever disallowed. The various components of estate planning follow:

Wills: Wills spell out the important details of what you would like to happen after you die. Who should assets be left to? Who do you want to be your children’s legal guardians? At what point should your children have access to assets left in your estate? Who do you want to be the person responsible for executing your wishes according to your will (your executor)? While a will is an important document, it’s only one part of your estate. Asset titling and beneficiary designations are equally important and should be coordinated and consistent with your will.

Titling Assets: Non-retirement assets like homes, bank accounts and investment accounts can be titled in the name of one or more individuals.  A person named on an account or property title are its legal owners and who will have ownership rights in the event of your death. The titling of assets should be coordinated with your will to avoid any inconsistency.

Beneficiary designations: Retirement accounts and insurance policies have beneficiary designations that direct who will inherit an asset after an owner’s death.  The person(s) named as beneficiary will receive the asset without consulting a will or probate. It’s therefore important that beneficiary designations are reviewed in estate planning and are consistent with wills.

Financial Powers of Attorney: powers of attorney are legal documents that allows a designated person to act on your behalf. A durable power of attorney allows a designated person to act on your behalf in the event you are incapacitated. These documents provide important continuity to ensure that you and a trusted person can maintain access to financial accounts and assets in all circumstances except death.

Advanced Medical Directives: Medical directives (also called living wills) allow you to specify your wishes for medical care in the event you are unable to speak for yourself. They also allow you to direct medical points of contact and decision makers. Designating who should make decision in the event you can’t speak for yourself is important since a next of kin or spouse is legally given this responsibility. A medical directive helps preserve this right in the event your marriage is no longer valid.

Trusts: Trusts are not necessary for most individuals and are beyond the scope of what we’ll cover here. One place where trusts can be helpful to LGBTQ+ individuals if you have extended family members who might be hostile towards your nuclear family unit. Trusts can help to avoid probate having assets directly passed to beneficiaries named in a trust. Avoiding probate can provides privacy avoiding public disclosure of what assets are passed to whom and avoid scrutiny of hostile family members.

How much should I plan for Childcare and Ongoing costs?

Daycare:

Full-time Daycare Costs: $1600-3000/month

Home-based daycare (friend/ neighbor): $1000-2000/month

“Nanny”/ In-home care: ~$4k-5k/month (incl. payroll costs)

Shared Nanny ~ half that: $2000 -3000/month.

Au-Pairs: (~$17-25k/year)

College:

Public in-state College:

Costs: $25k-40k/yr (in today’s dollars)

Savings for a child to have fully paid for college assuming you invest: $750/month (age 1-18)

Public out-of-state College:

Costs: $40k-60K/yr (in today’s dollars)

Savings for a child to have fully paid for college assuming you invest: $1,500/month (age 1-18)

Private College:

Costs: $40-95k

Savings for a child to have fully paid for college assuming you invest: $3,000/month (age 1-18)

All savings figures above assume current college costs increase at a rate of 2.5% for inflation