Surrogacy Escrow Funds

The assisted reproduction industry can feel something like the Wild West. And, to mix metaphors, California often is Ground Zero, given the number of surrogacy agencies in this state. Anyone can start a "surrogacy agency" -- unlike adoption agencies, there is no particular state or federal regulation of these businesses (beyond the regulation to which all businesses are subjected). And, as the science of reproductive endocrinology continues to advance, the options for creating children continue to expand -- as long as you can afford them.

Given the intense desire many people feel to become parents -- and given all the opportunities out there to have children through assisted reproduction -- it is no wonder that small surrogacy agencies are popping up all over the country. Many of these agencies are run by committed and ethical people who legitimately want to assist folks in fulfilling their dreams of becoming parents. But unfortunately, in California we have recently had to deal with the mess left by at least two surrogacy agencies where unscrupulous owners have taken the money and run, leaving intended parents out thousands and thousands of dollars and with absolutely nothing to show for their trust in agencies that were supposed to be helping make their dreams come true; and leaving pregnant surrogates stranded with the monies that had been set aside to compensate them and cover their expenses gone into the pockets of unethical business people.

Thankfully, the state of California is intervening in this mess in one small but important way. Assembly Bill 2426 has passed in the state legislature, and is sitting on Governor Schwarzenegger's desk. The bill would prevent surrogacy agencies from holding client funds, instead requiring that these funds be deposited into an independent, licensed, bonded escrow account or held in a State Bar approved attorney trust account. Specifically, the bill would provide that: "(a) A nonattorney surrogacy facilitator shall direct the client to deposit all client funds into either of the following: (1) An independent, bonded escrow depository maintained by a licensed, independent, bonded escrow company. (2) A trust account maintained by an attorney. (b) For purposes of this section, a nonattorney surrogacy facilitator may not have a financial interest in any escrow company holding client funds. A nonattorney surrogacy facilitator and any of its directors or employees shall not be an agent of any escrow company holding client funds. (c) Client funds may only be disbursed by the attorney or escrow agent as set forth in the assisted reproduction agreement and fund management agreement."

This may seem like a small step, but it will provide important protections to people involved in surrogacy -- both the intended parents and the surrogates. Let's hope that Governor Schwarzenegger signs the bill quickly, so we can put this sorry chapter in assisted reproduction behind us in the state of California and move forward with financial integrity.