On April 2, 2025, the Assisted Reproduction and Surrogacy Parentage Act (ARSPA) went into effect, making Michigan the final state to lift its criminal ban on compensated surrogacy. This landmark law allows intended parents and surrogates to enter legally enforceable agreements that include compensation, free from criminal penalties. It also establishes a clear process for securing judgments of parentage, aligning Michigan with modern family-building practices across the United States. This advisory provides an overview of the typical compensation practices and related financial considerations found in Michigan surrogacy agreements under the new law.

Base Compensation

One of the key elements in a surrogacy agreement is base compensation, which is negotiated between the parties and paid to the surrogate for her time, commitment, and willingness to undertake the medical and emotional responsibilities of pregnancy. This typically begins after a pregnancy is confirmed by ultrasound and continues monthly until delivery.

In most agreements, a portion of the base compensation becomes fully vested after a specific stage of pregnancy, ensuring fairness in the event of a loss or premature delivery. The amount varies and is influenced by factors such as prior surrogacy experience, region, and whether an agency is involved.

Reimbursable Expenses

In addition to base compensation, most agreements reimburse surrogates for out-of-pocket expenses. Michigan law requires reimbursement only for the surrogate’s independent legal counsel. However, it is common for intended parents to also cover a range of pregnancy-related costs, consistent with established surrogacy practices and the goal of minimizing the surrogate’s financial burden.

Typical reimbursements include health insurance premiums and accidental death coverage, often secured by the intended parents. Many agreements also include monthly allowances for expenses, including transportation, over-the-counter medications, and pregnancy supplies. Maternity clothing and travel for medical appointments, especially over long distances, are also usually covered. If a physician orders bed rest or other restrictions, agreements often include additional support for childcare or housekeeping.

Medical Procedures or Complications

Most agreements include compensation for certain medical events or procedures. This can cover cesarean delivery, selective reduction, surgical procedures related to miscarriage, and other complications. If long-term consequences arise, such as loss of reproductive organs, additional compensation may be provided.

Escrow and Payment Management

While the law does not require escrow, using a licensed escrow agent is widely considered best practice. Escrow ensures payments are timely, documented, and managed to protect all parties.

Typically, intended parents deposit funds at the outset, and the escrow agent disburses them based on a written schedule. Most agreements require maintaining a minimum balance throughout the pregnancy and shortly after delivery.

Tax Considerations

Surrogates should be aware of potential tax implications. Although the Internal Revenue Service (IRS) has not issued formal guidance, compensation is generally presumed to be taxable. The taxability of payments may depend on their nature and how they are structured. Both surrogates and intended parents are encouraged to consult with qualified tax professionals.

Final Considerations

In conclusion, Michigan’s new surrogacy law brings long-awaited legal clarity to compensated surrogacy. Whether parties work with an agency or independently, the law requires separate Michigan-licensed legal counsel for both intended parents and surrogates. This ensures independent advice and informed decision making. Understanding the compensation terms in surrogacy agreements is an important part of that process.