One of the many questions hopeful adoptive parents ask themselves when considering adoption is “How am I going to fund this adoption process?”. We understand your predicament, and trust us, the answer isn’t simple. Many families turn to fundraisers of their own, some pick up a weekend job or side gig, and others unfortunately get steered away from the idea altogether due to lack of funds. Well, if you’re like these hopefuls and have the heart to adopt but are seeking a much needed financial break, the 2020 Secure Act may be to your rescue! 


The recently developed act, an acronym standing for Setting Every Community Up for Retirement Enhancement, beneficially allows Americans to withdraw sums of cash from their IRA, 401K and other retirement accounts early without penalty. Usually when someone attempts to extract funds prematurely from their plan, they are hit with a whopping 10% early-withdrawal fee. Not exactly ideal, right? Now, however, the Secure Act allows you to retrieve up to $5,000 from your retirement plan after the finalization of an adoption without the extra hefty 10% added on. Knowing you have a penalty-free option, which could possibly advance you to the next step of adopting, can mean everything to you and other hopeful adoptive parents too! 


Although capped at $5,000 per taxpayer, the limit can increase to $10,000 collectively for married couples who each hold a retirement account. We know what you’re thinking, “Won’t $10,000 out of our retirement plan take away from the funds we need later in life?” The good news is that the money taken out early from the plan can always be put back into the retirement account later if you choose to do so, whether in increments or one lump sum. If you decide to replace the funds at a later date, it’s a plus to know these replacement funds are not taxable to you under the Secure Act. In fact, the withdrawal becomes labeled as Rollover Capital and remains tax exempt to you for the remainder of the time you hold the account. On top of that, adoptive parents taking advantage of this act are given a 365 day timeframe to pull out the money penalty-free once an adoption is finalized. As long as the adopted child is physically or mentally unable to support themselves legally, or if they are younger than 18 years old, hopeful adoptive parents are qualified to extract the funds without the typical 10% penalty.  


We at the law offices of Ellen M Kaplan, p.a. are here to support and guide families through their adoption plan and do so to the very best of our ability. We strive to be informative, explanatory and provide birth parents and hopeful adoptive parents alike with Information designed to help make informed decision. We understand it can be difficult to navigate the map of adoption, but we are always here to help guide you to success! If you are interested in taking advantage of this penalty free opportunity, we strongly encourage each individual to discuss their options with their accountant! 


Happy trails! 



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