Assembling a longer-term annuity from child support via frozen embryos

by philg

“Anti-Abortion Groups Join Battles Over Frozen Embryos” (nytimes, January 19, 2016) has an interesting financial planning angle that the newspaper didn’t explore.

A properly planned career of collecting child support pays better than going to college and working at the median college graduate wage (see Real World Divorce, e.g., the California, Massachusetts, Utah, or Wisconsin chapters). It can provide earnings over a long period of time, e.g., if a plaintiff has the first child at age 18 and the last child at age 40, in Massachusetts the cash will flow until age 63. However, with human lifespan increasing, a plaintiff might want to assemble a portfolio of cashflow-positive children that will pay dividends beyond age 63. Enter the New York Times to show how it can be done!

What if embryos are frozen when a plaintiff is age 30? They can be incubated either by the plaintiff (if female) or via a surrogate at any later date, e.g., when the plaintiff is 60 years old, thus providing a stream of tax-free cash through age 78, 81, or 83 depending on the state. What if the defendant parent has died in the intervening years? Many states allow for a plaintiff to collect child support from the estate of a dead parent.

An advantage of this approach is that, due to the spread in birth years, the amounts of the payments can be roughly double than if children from the same defendant had been born in the same year (e.g., see New York or Wisconsin where the formula is very simple; one child pays 17% of a defendant’s pre-tax income while three children yield only 29% of the defendant’s pre-tax income (remember that the money is tax-free to the defendant, though, so this corresponds to roughly half of the defendant’s after-tax income)). A disadvantage is that the future cashflow needs to be discounted. Given a sufficiently high discount rate it might make more sense to incubate the embryo to term today and invest the child support proceeds in a Vanguard index fund.

11 thoughts on “Assembling a longer-term annuity from child support via frozen embryos”

  1. As a further refinement, the woman could stockpile frozen embryos fertilized a variety of different males. The financial state of the sperm sources may change in future years, with an inventory of different sources, she could choose to develop only the most lucrative possibility(s).
    Another point in favor of freezing embryos for future use is that for many women it will probably be easiest to obtain the semen samples from potentially lucrative males when she is young.
    Another possibility would be to obtain semen samples and cryopreserve them for future use: https://en.wikipedia.org/wiki/Semen_cryopreservation. The woman could amass a large inventory of semen samples from different males and apply them strategically over time to optimize her finite egg resources. However, I don’t know what the legal issues are for storing semen samples from males without obtaining their consent.

  2. Legal question: does the woman need to actually birth the child to have various financial claims against the father? Or could you basically harvest/freeze embryos (containing the woman’s genetic material), fertilize them, and the hire a surrogate to bring the fertilized embryo to term? If so, it seems like an enterprising person could parallelize the whole process and obtain ten sources of income!

  5. Perhaps with some Wall Street friends you could securitize the embryos the same way they did with mortgages last decade. Embryo Backed Securities.

    A woman would sell her interest in child support payments in exchange for a lump sum up front. The investors collect the payment revenue stream going forward. The payment streams are collected into tranches, repackaged, and sold to other investors. Sort of like what David Bowie did with his music royalties.

  6. I don’t know if it was a hoax, but there was a news item a while ago, about a woman selling some rapper’s sperm on Ebay. So I guess another way for a woman to make some money is to obtain and sell the sperm of a rich man to other women.

    Curious double standard. If a man is raped, resulting in pregnancy, he is forced by law to see that pregnancy through. If a woman is raped, resulting in pregnancy, do we force her to have the baby?

  8. Would it be advantageous to give birth in certain states, jurisdictions or anything like that? If so, another advantage of embryonal planning.

    I presume that the buyers of rapper sperm also could claim child support if things proceed as they should. That could be troublesome.

  9. Better Plan:

    A 14-year-old girl gets a 21-year-old sister or cousin to collect sperm from a rich married guy. She gives birth at age 15 and collects for the next 18 years. Does he want to go to court and answer questions about how a 14-year-old got pregnant with his sperm?

    When she’s 16 she leaves the baby with the same sister or cousin. She goes to a party at a private high school for rich kids. She gives a blow job to each guy at the party and freezes the sperm in labeled test tubes. She waits until they are 25 or 30 and then defrosts the tube of the most successful “donor” to become the father of her second baby. Guy says it can’t be his kid? DNA test says it is. Mom says she got really drunk and can’t remember what happened. Maybe the guy took advantage of her while she was unconscious.

    If one of the guys whose name is on a test tube happens to be super successful, she can select his sperm for two or three more kids at any time (using a surrogate mother if desired).

  10. (Egg-freezing should be part of a smart gurl’s plan as well, to protect against financial loss from aging or early infertility. Whether using fresh or frozen eggs and surrogate mother or own womb, it doesn’t make sense to prematurely lock in the father until the man’s level of financial success is known.)

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