Egg donor agencies are up next. A new proposed law will now significantly change how California egg donor agencies handle client trust funds. Well more specifically, the law will make clear that egg donor agencies must play by the same rules as surrogate agencies with regards to client trust funds. Under current California law, enacted in 2010, surrogacy agencies are prohibited from managing and dispersing client trust funds. More specifically, Family code §7961 requires non-attorney surrogacy facilitators deposit client funds into either:

1) An independent, bonded escrow depository maintained by a licensed, independent, bonded escrow company; or
2) A trust account maintained by an attorney.

The term “surrogacy facilitators” was further defined and included to §7960 as follows:

(e) “Surrogacy facilitator” means a person or organization that engages in either of the following activities:
1) Advertising for the purpose of soliciting parties to an assisted reproduction agreement or acting as an intermediary between the parties to an assisted reproduction agreement.
2) Charging a fee or other valuable consideration for services rendered relating to an assisted reproduction agreement.

This definition on its face could arguably be interpreted to include all assisted reproduction related agencies, not just surrogate agencies. The plain language of the definition refers to parties engaging in activities related to assisted reproduction instead of specifically surrogacy. So were egg donor agencies prohibited from holding client trust funds since 2010? That can definitely go both ways. Ultimately, the term “surrogacy facilitator” was defined, so the reference to an assisted reproduction agreement could have likely and more realistically been in the context of a surrogacy arrangement. It really falls back to the legislative intent.

However, proposed AB1049 solves any misconceptions. This new proposed law, introduced on February 26, 2015, will specifically include egg donor facilitators under §7961. If such bill is passed, it will be very clear that egg donor agencies, just like surrogate agencies, will be required to direct their clients to bonded escrow companies or attorneys to maintain client trust accounts.

Here is the text of what may soon become California Family Code §§7960, 7961:

AB 1049, as introduced, Patterson. Parent and child relationship.

THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:

PART 7. SURROGACY FACILITATORS AND AND
DONOR FACILITATORS, ASSISTED REPRODUCTION AGREEMENTS FOR
GESTATIONAL CARRIERS, AND OOCYTE DONATIONS

SEC. 4. Section 7960 of the Family Code is amended to read:

7960. For purposes of this part, the following terms have the
following meanings:

(a) “Assisted reproduction agreement” has the same meaning as
defined in subdivision (b) of Section 7606.

(b) “Fund management agreement” means the agreement between the
intended parents and the surrogacy or donor facilitator
relating to the fee or other valuable consideration for services
rendered or that will be rendered by the surrogacy or donor
facilitator.

(c) “Intended parent” means an individual, married or unmarried,
who manifests the intent to be legally bound as the parent of a child
resulting from assisted reproduction.

(d) “Nonattorney surrogacy or donor
facilitator” means a surrogacy or donor practitioner who
is not an attorney in good standing licensed to practice law in this
state.

(e) “Surrogacy or donor facilitator” means a person or
organization that engages in either of the following activities:
(1) Advertising for the purpose of soliciting parties to an
assisted reproduction agreement or for the donation of oocytes
for use by a person other than the provider of the oocytes, or
acting as an intermediary between the parties to an assisted
reproduction agreement. agreement or oocyte
donation.
(2) Charging a fee or other valuable consideration for services
rendered relating to an assisted reproduction agreement.
agreement or oocyte donation.

(f) “Surrogate” means a woman who bears and carries a child for
another through medically assisted reproduction and pursuant to a
written agreement, as set forth in Sections 7606 and 7962. Within the
definition of surrogate are two different and distinct types:
(1) “Traditional surrogate” means a woman who agrees to gestate an
embryo, in which the woman is the gamete donor and the embryo was
created using the sperm of the intended father or a donor arranged by
the intended parent or parents.
(2) “Gestational carrier” means a woman who is not an intended
parent and who agrees to gestate an embryo that is genetically
unrelated to her pursuant to an assisted reproduction agreement.

(g) “Donor” means a woman who provides her oocytes for use by
another for the purpose of assisting the recipient of the oocytes in
having a child or children of her own.

SEC. 5. Section 7961 of the Family Code is amended to read:

7961. (a) A nonattorney surrogacy or donor 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 or
donor facilitator may not have a financial interest in any
escrow company holding client funds. A nonattorney surrogacy or
donor 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.

(d) This section shall not apply to funds that are both of the
following:
(1) Not provided for in the fund management agreement.
(2) Paid directly to a medical doctor for medical services or a
psychologist for psychological services.

We anticipate a vote on this new statute later this month and expect it to pass rather easily. If you operate a donor program, please feel free to contact us on how you can be compliant with this new law should it go in effect.