Financial Planning for Surrogacy Costs

Quick answer

• Start by thoroughly researching all potential surrogacy costs, which can vary significantly.
• Create a detailed budget that accounts for agency fees, medical expenses, legal costs, and potential lost wages.
• Explore all financing options, including savings, loans, and potential grants or assistance programs.
• Prioritize building or maintaining a robust emergency fund to cover unexpected medical or personal expenses.
• Understand the tax implications and consult with a tax professional regarding potential deductions.
• Develop a clear repayment plan if financing is required, factoring in interest and repayment timelines.

Who this is for

• Intended parents exploring or actively pursuing surrogacy as a path to parenthood.
• Individuals and couples who need a clear understanding of the financial commitments involved in surrogacy.
• Those seeking actionable steps and strategies to manage and finance surrogacy expenses.

What to check first (before you act)

Goal and timeline

Before diving into financing, clearly define your surrogacy journey’s goals and estimated timeline. This includes understanding the typical stages of surrogacy and when major expenses are likely to arise. Knowing your timeline will help you prioritize savings and financing strategies.

Current cash flow

Analyze your current income and expenses meticulously. Understand exactly how much money comes in and how much goes out each month. This will reveal how much you can realistically allocate towards surrogacy costs from your regular income and identify areas where you might be able to cut back.

Emergency fund or safety buffer

Assess your existing emergency fund. Surrogacy can involve unforeseen medical complications or delays, so having a substantial safety net is crucial. Aim for at least 3-6 months of living expenses, and consider increasing this buffer if your surrogacy journey is complex or lengthy.

Debt and interest rates

Take stock of all your current debts, including mortgages, car loans, student loans, and credit card balances. Pay close attention to the interest rates on each. High-interest debt can significantly increase the overall cost of financing surrogacy, so it’s often wise to address this before taking on new loans.

Credit impact

Understand how taking on new debt or inquiring about loans might affect your credit score. A good credit score is essential for securing favorable loan terms. Review your credit reports and address any inaccuracies before applying for significant financing.

Step-by-step: Affording your surrogacy journey

Step 1: Research comprehensive surrogacy costs

• What to do: Gather detailed information on all potential expenses associated with surrogacy. This includes agency fees, surrogate compensation, medical screenings, IVF procedures, legal fees, escrow services, maternity care, and potential lost wages for the surrogate.
• What “good” looks like: You have a detailed spreadsheet or document outlining estimated costs for each stage, with a clear total projected expense.
• A common mistake and how to avoid it: Underestimating costs by only considering agency fees. Avoid this by seeking itemized breakdowns from multiple agencies and consulting with fertility clinics and legal professionals.

Step 2: Create a detailed surrogacy budget

• What to do: Based on your research, build a realistic budget that allocates funds for each identified cost category. Include a contingency fund for unexpected expenses.
• What “good” looks like: A comprehensive budget that accounts for all known and potential costs, with a realistic total figure.
• A common mistake and how to avoid it: Creating a budget that is too optimistic or doesn’t include a buffer. Avoid this by being conservative with estimates and adding at least 15-20% for unforeseen circumstances.

Step 3: Assess your current financial resources

• What to do: Evaluate your savings, investments, and current income to determine how much you can contribute directly to surrogacy costs.
• What “good” looks like: You have a clear picture of your available liquid assets and how much you can realistically save over your estimated timeline.
• A common mistake and how to avoid it: Assuming you can rely solely on future income without accounting for ongoing living expenses. Avoid this by realistically projecting how much disposable income you’ll have after essential bills are paid.

Step 4: Explore financing options

• What to do: Investigate various financing avenues, such as personal loans, home equity loans, 401(k) loans (use with caution), or specialized fertility financing options.
• What “good” looks like: You’ve identified 2-3 potential financing sources with competitive interest rates and terms.
• A common mistake and how to avoid it: Taking the first loan offer without comparing rates and terms. Avoid this by shopping around and understanding the total cost of borrowing for each option.

Step 5: Consider grants and assistance programs

• What to do: Research non-profit organizations, fertility foundations, and government programs that may offer grants or financial assistance for intended parents pursuing surrogacy.
• What “good” looks like: You’ve identified eligible programs and are in the process of applying or have a clear understanding of application requirements.
• A common mistake and how to avoid it: Not applying for grants due to perceived complexity or eligibility barriers. Avoid this by thoroughly reading eligibility criteria and seeking guidance from the program administrators.

Step 6: Address high-interest debt

• What to do: Prioritize paying down or consolidating high-interest debt, as this will reduce the overall cost of your surrogacy journey.
• What “good” looks like: You have a plan to tackle high-interest debt, either by paying it down aggressively or refinancing it at a lower rate.
• A common mistake and how to avoid it: Taking on new debt for surrogacy while carrying significant high-interest debt. Avoid this by making debt reduction a priority before or alongside financing your surrogacy.

Step 7: Build or bolster your emergency fund

• What to do: Ensure you have a robust emergency fund in place to cover unexpected medical bills, surrogate needs, or personal financial emergencies.
• What “good” looks like: Your emergency fund is adequately funded to cover several months of living expenses, providing a critical safety net.
• A common mistake and how to avoid it: Depleting your emergency fund entirely for surrogacy costs. Avoid this by only using savings that exceed your essential emergency buffer.

Step 8: Consult with financial and tax professionals

• What to do: Seek advice from a financial planner and a tax advisor to optimize your financial strategy and understand potential tax benefits or implications.
• What “good” looks like: You have a clear understanding of how surrogacy costs might impact your taxes and a strategy for managing your overall finances.
• A common mistake and how to avoid it: Not seeking professional advice and missing out on potential tax deductions or making suboptimal financial decisions. Avoid this by scheduling consultations early in your planning process.

Step 9: Establish an escrow account

• What to do: Set up and fund an escrow account as required by most surrogacy agencies and legal agreements to hold and disburse funds to the surrogate and other parties.
• What “good” looks like: The escrow account is funded according to the agreement, and you understand the disbursement schedule.
• A common mistake and how to avoid it: Failing to understand the escrow terms or not ensuring sufficient funds are available when needed. Avoid this by carefully reviewing the escrow agreement and maintaining regular communication with the escrow company.

Step 10: Develop a repayment plan for loans

• What to do: If you’ve taken out loans, create a clear repayment plan that outlines monthly payments, interest accrual, and the total repayment timeline.
• What “good” looks like: You have a structured plan for repaying any borrowed funds, ensuring you can meet your obligations without undue financial strain.
• A common mistake and how to avoid it: Not having a concrete plan for loan repayment, leading to missed payments or accumulating excessive interest. Avoid this by budgeting for loan payments as soon as the funds are disbursed.

Common mistakes (and what happens if you ignore them)

| Mistake | What it causes