"There is no truth whatsoever to the story that I am trying to deny John custody of the children after my death," Edwards wrote in an e-mail.
The report claimed Edwards was grooming her 28-year-old daughter Cate to raise 12-year-old Emma and 10-year-old Jack.
Cate is a Harvard-educated lawyer who campaigned for her father in 2004 and is now clerking for a federal judge in Alexandria, Virginia.
Edwards is battling terminal breast cancer and her sister denies her condition has taken a turn for the worse, saying, "She's healthy right now. She's not dying. She's doing extremely well. She's undergoing treatment."