Importance of Escrow Accounts

For people interested in gestational surrogacy, they should be familiar with escrow accounts, also known as trust accounts. Escrow accounts are an important aspect of gestational surrogacy arrangements.  Here in California, it is required by law that if the parties are matched through a surrogacy agency, then an escrow/trust account needs to be established and managed by a licensed attorney or a bonded and insured escrow company.  Escrow/trust accounts also help ensure that monies set aside for each surrogacy arrangement are secure and can be accounted for by the agencies and the parties.  Note that escrow account management rules may vary with each state.

Issues such as the duration of the escrow account, the amount of money that will be placed in the account, and what to do if the parties have a dispute regarding distribution from the account should all be documented by the manager of the escrow account in a written agreement, and signed by the parties. At our firm, we prefer an agency representative also sign the escrow agreement when we manage escrow in order to document that the agency is aware of the terms in the escrow agreement.   It is important that the terms in the escrow agreement do not conflict with any escrow related terms in the parties’ surrogacy agreement. 

A few examples of critical elements that should be found in the escrow agreement are disbursement of payments, authorization of payments, and duration of the account remaining active.  It should be clearly outlined in both the escrow agreement and the surrogacy contract when and how the payments or reimbursements will be paid to the surrogate, other medical providers, and/or directed to the Agency.  Also, it should be clearly delineated in both the escrow agreement and the parties’ surrogacy agreement who will authorize the Account Manager to make the payments.  And lastly, there should be no misconceptions to both the Intended Parents and the surrogates as to how long an escrow account remains open and active, depending on a successful birth of the baby or not.

Since any surrogacy arrangement is an intricate, and sometimes bumpy journey, having the escrow firmly in place with the right resources helps to smooth the way.  It’s important that Intended Parents find reputable attorneys or escrow companies that will meet their escrow account needs with accurate and consistent escrow agreements and surrogacy agreements. Our firm is happy to assist Intended Parents or Surrogates with any escrow needs, if only to allow them to focus on their relationship with each other, and to ensure a successful pregnancy and birth.

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