March 7

Surrogate Breaches Surrogacy Agreement, Refuses to Terminate Pregnancy

Crystal Kelley agreed to serve as a surrogate to a married couple with fertility issues, for payment of $22,000. Kelly and the couple executed a Surrogacy Agreement, which provided that if there was something wrong with the fetus, the couple — as the intended parents — would make the decision as to whether the fetus should be aborted. Fertilized eggs were implanted into Kelley’s uterus. Weeks later, an ultrasound of the fetus revealed severe abnormalities. The couple exercised their rights under the Surrogacy Agreement, and asked Kelley to abort. Kelley refused. The couple offered Kelley an additional $10,000 to abort, and Kelley countered with $15,000. The couple refused. Kelley did not honor the Surrogacy Agreement, and gave birth to the child months later. The child was put up for adoption with another family, and is not expected to live long, due to the severe abnormalities.

This true story represents a nightmare scenario for intended parents who are considering surrogacy. They did the right thing by executing a Surrogacy Agreement, which outlines the intentions, roles, and responsibilities of the surrogate and the intended parents. While the idea of aborting a fetus with severe abnormalities might sound like a terribly unsavory subject, it is just one of many issues that must be addressed in the Surrogacy Agreement, so that all parties are clear as to the terms of the contract. Crystal Kelley refused to honor those terms. She breached the contract. If she was not willing to consider abortion in these circumstances, she should have never executed the agreement. The couple, of course, cannot force Kelley to have an abortion.The couple does have the right to sue Kelley for breach of contract, so that they can recoup the money they gave to Kelley, as well as the cost for expenses they paid on her behalf. But the money is really a minor issue when you consider the issues involved in this case.

It must be noted that most surrogacies have happy endings. But there is always a possibility that the scenario above could happen. In order to avoid this problem (though it is never possible to guarantee how a party will act), it is critical that the parties entering into the Surrogacy Agreement comprehend what they are willing and able to do under the contract. The intended parents will likely have an attorney draft the contract, but it is also important that the surrogate have an attorney to review the contract on her behalf, and negotiate any issues that might arise. The intended parents will generally pay for an attorney independent of their own to review the contract for the surrogate. Additionally, a psychological evaluation prior to executing the contract allows for all of the parties to discuss many issues, including abortion. It is critical that the intended parents and surrogate have a complete understanding of the scope of the Surrogacy Agreement in order to avoid conflict during the pregnancy and after the birth of the child.

February 26

Mortgage Forgiveness Debt Relief Act Extended through 2013!

This is great news for homeowners who are considering a short sale on their principal residences, or for those who are requesting a waiver of the deficiency balance on the loan. Generally, if a bank lends you money to purchase your home, and the bank later cancels or forgives the debt balance, you may have to include the cancelled balance as income for tax purposes. The Mortgage Forgiveness Debt Relief Act allows a homeowner to exclude this amount, which saves a homeowner thousands of dollars in tax liability.

For example, if a homeowner owes $100,000 on a home, and the homeowner and the bank agree to a short sale on the property for $75,000, there is $25,000 in principal balance left over. Without the Mortgage Debt Relief Act, the homeowner would have to pay federal taxes on the $25,000 balance, because the government would consider the $25,000 “earned income.” Because the Act is in place for 2013, the tax debt owed by the Homeowner will be waived, if the closing takes place in 2013. This also applies if the homeowner and bank come to some agreement where the deficiency balance is waived for other considerations, such as a stipulated foreclosure judgment. If you are considering a short sale of your principal residence or are currently involved in a foreclosure lawsuit, it will be beneficial to have it resolved this year so that you can take advantage of this Act before it expires.

February 14

Florida Judge Approves Birth Certificate with Three Parents

A judge in Miami-Dade County approved a birth certificate with three parents: a married, lesbian couple and a friend who was the sperm donor. The decision ends a two-year paternity fight between the couple and the friend, who sought a larger role in the child’s life. If the couple had executed a sperm donation contract prior to the donation, which outlined the parties’ rights and responsibilities, this dispute could have largely been prevented because the parties would be bound by the terms of the executed contract. Instead, the couple and the friend only had an oral agreement. If you are considering using a surrogate, egg donor, or sperm donor, it is important to have all of the parties’ rights and responsibilities agreed to and contracted to prevent disputes later on down the road.