Some Estate Planning is Really Complicated

Young couple calculating budget

Question: When is an individual created from genes contributed by both parents not a sibling?

This isn’t some theoretical puzzle pondered by a mystic on a mountain seeking to attain a higher level of consciousness.  Quite the contrary.  In fact, the answer is very down-to-earth: It depends on the state in which you live.

In the words of Milwaukee estate planning attorney Stephanie Rapkin, “The freezing of ova and sperm for later usage is no longer the story from a science fiction book or movie, it is now almost a commonplace (sic) practice and rapidly expanding.  The law, however, simply has not caught up with these remarkable advances.”

That’s an understatement. State law- to the extent it even exists- varies from one jurisdiction to another.  Some states treat genetic material that has been fertilized differently than genetic material that is not fertilized.  A few states mandate that there has to be an indication that you intended to have children with the person providing the other half of the genetic material.  “It’s very complicated,” Says Rapkin.  “Many areas of the law intersect in this area.  In addition, there are religious and moral issues. It’s a political hot potato.”    Under Louisiana law, for instance, it’s illegal to ever destroy genetic material.

According to Rapkin, who authored Planning for Large Estates, most- if not all- states generally recognize children born within 9 months of a parents’ death as lawful heirs.  But what if your spouse uses your sperm or eggs to create a child months or even years after you have died?   Few states recognize posthumously conceived children.  What are the inheritance rights of such a child?  Furthermore, what is to be done with the genetic material you left behind?

“It is now possible,” says Rapkin, “that there could be two individuals involved in the conception of a child who are genetically unrelated to the child.  It is even possible to have died and still reproduce, as it is now possible to harvest sperm of a decedent.”

Even the federal government has to wrestle with this issue. Social Security must decide whether to recognize children conceived posthumously in order to determine whether they are eligible for survivor benefits. Social Security generally bows to state law on issues not governed by federal statute.  Thus, because many state laws don’t recognize so-called “after-born” children, Rapkin says “Social Security can base its decision on the laws of the state in which the family lives and rule that the child is not entitled to benefits.”

Make Your Wishes Known

The answer to the question posed above is critically important- not just to the child born posthumously, but to siblings (potential rivals for a piece of the estate), surviving spouses and grandparents.  And, because the law is largely absent on this topic, you need to be explicit about your wishes when drafting your estate plan.  Unfortunately, “As a general rule there’s no planning or discussion about this” when drawing up an estate plan.  Just don’t rely on your estate planning attorney to bring it up.  Most don’t, says Rapkin.

When defining beneficiaries who are eligible to inherit, she recommends using language such as, “all my children, including those born within X years of my death.”   The section of the Uniform Probate Code  (UPC) that covers this topic specifies three years, but the choice is up to you.  (Only two states have adopted the UPC’s provisions on this issue.)

Using a trust for this purpose is better than a will. As Rapkin explains, when assets are left via a will, the probate process requires that the estate be settled and assets distributed within a specific period of time after death.   “With a trust, you don’t have to close it out in 18-24 months.  You can have things sitting around waiting.”  For instance, the trust can hold assets until a child reaches a certain age.

Suppose you already have two children, but want to give your surviving spouse the option to conceive after your death.  You could plan for the possibility of an as yet unconceived child by dividing your assets into three equal shares.  The third portion would be held by the trust in the event a child is born, say, within a certain time (that you specify) after your death.  If this doesn’t occur, the assets could then be distributed to your two children.

If you have fozen eggs or sperm being held by a facility that stores genetic material, you should also cover this in your will or trust.  Rapkin suggests language such as ‘I am leaving this to the spouse or partner I have chosen while alive”.  Or, “Upon my death, my executor/personal representative is to destroy/maintain this material.”

Lawsuits are Increasing

Heated court battles over who is “family” are hitting the courts.

In one example, says Rapkin, a California man died, leaving his sperm to his girlfriend in his will. He even went so far as to specifically state that he intended her to use it. In addition, he had a written agreement with the sperm bank to this effect.

None-the-less, in an attempt to prevent any competition for their share of dad’s estate, the children from the man’s previous marriage challenged this.  The probate judge agreed and even ruled that they could dispose of his sperm.

“The case went to the California appeals court, which resolved the issue in the girlfriend’s favor,” according to Rapkin.  In her view, “You [should] have the right to dispose of genetic material as tangible personal property just like any other tangible personal property.”

Don’t call me “Grandma”

Potential grandparents also need to address this issue.  If assets are being left to grandchildren, grandma and grandpa need to define who qualifies.  In particular, they should specify whether this includes individuals “born after our own child’s death.”

In a New York State case a man diagnosed with cancer froze his sperm for his wife to use.  He did not recover.  A couple of years after his death she chose to use it.

The trust created by the man’s parents trust did not specifically address children conceived after their son’s death, so it was left to the court to decide.  The New York court ruled that such children could be included in the class to inherit.

However, only a couple of states have specifically adopted laws about the rights of “after-born” children.   In some cases, legislators have voted to extend inheritance rights to such individuals; in other states they are specifically excluded.

Location, Location, Location

In another California case a man left sperm to his wife.  His parents hated their daughter-in-law.  They presented evidence that convinced the court it was unlikely their son would want to have a child produced using his sperm.

“The parents won.  They got his sperm destroyed,” says Rapkin.  “But there’s an important distinction:  If it had been a fertilized egg, depending upon the state where they lived, [the parents] might not have won the case.”

The key lesson is that state law is waaay behind the curve on this.  If you have specific wishes, don’t assume they will be carried out.  Find a competent attorney who can draft a will, or  better, a trust, that will stand up to a legal challenge.