How do Escrow providers differ in Surrogacy Arrangements?
The services that escrow providers offer vary greatly between providers. Some of the most significant differences fall into one or more of the following areas:
- Fund Management vs. Fund Holding
Fund Management is an escrow arrangement in which disbursement requests are submitted to the escrow provider by the parties, the parties’ representatives, or the agency case managers and the escrow provider takes on the responsibility and liability of ensuring that the disbursements made are accurate, comply with the terms of the underlying egg donor or surrogacy agreement and are accompanied by adequate supporting documentation, which is verified by the escrow provider.
Fund Holding is an escrow arrangement where a designated person or class of people (e.g., case managers, agency owners, attorneys) who are not direct parties to the surrogacy or egg donor agreement take full responsibility and liability for submitting the disbursement requests for the parties. In this scenario, the escrow provider is under no obligation to question the accuracy of the disbursement request, verify the supporting documentation associated with the requests or ensure that the disbursement request complies with the express terms of the surrogacy and/or egg donor agreement(s). It is simply a pay-upon-demand arrangement where the escrow provider does little more than hold the funds in a secure account and disburses the funds when directed to do so by the designated person(s).
- Specialized or General Escrow Provider
Surrogacy Agreements are inherently complex and unique and bear little resemblance to a typical real estate transaction. They cover a multitude of issues, ranging from mileage reimbursement, to establishing parentage, to setting out health care directives for the Surrogate. Issues are always time-sensitive and require quick, appropriate action that only a team of experienced, specialized professionals can deliver.
- Affiliated v. Independent
Agencies, while familiar with the process, often lack the legal, accounting, or escrow expertise to manage the funds. There is also an inherent conflict of interest, as they may use the funds to pay themselves, related parties, and third-party providers with whom they have a personal or commercial relationship. Moreover, agencies have no direct government entity setting regulations that they must follow. Consequently, insurers are reluctant to offer adequate insurance options that protect against theft or misappropriation.
Drafting Attorney Escrow
Attorneys are obligated to always act in their clients’ best interest. If the Attorney holding escrow also represents one of the Parties, then that attorney is obligated to fight for their position not the right position. The same is true if the attorney holding escrow represents the agency; they must defer to the agency and always act in its best interest. Additionally, most attorney do not specialize in escrow and therefore only offer Fund Holding arrangements.
Independent Escrow Company
An independent third-party escrow provider, on the other hand, remains beholden only to its fiduciary obligation to administer the funds in complete compliance in the expressed terms of the underlying contract between the parties.
Surrogate Solutions is proud to have the opportunity to work with SeedTrust and their experienced team.
The SeedTrust team provides expertise in managing escrow funds with specialized knowledge of the surrogacy process. Their confidential and easy-to-use online portal ensures that all payments are managed and distributed securely and on schedule, with communication and support throughout the process.
They will work with your patients and clients every step of the way to ensure you have the appropriate contracts, financial records, and agreements secured before they embark on a surrogacy journey.
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