How Does Escrow Work in a Surrogacy Journey?

White baby carriage with coins in itAn escrow account, in general, is an account held by a third party on behalf of parties who are completing a transaction. In a surrogacy context, this is when a third party (escrow agent) is selected to hold the funds that will be provided to the gestational carrier and to disburse those funds according to the contract terms. 

Who is the escrow agent?

Some surrogacy agencies offer internal escrow account services, meaning a certain amount is collected from the intended parents in advance and held by the agency, who will then be in charge of making payments out to the surrogate as are consistent with the terms of the contract. There is also the option to have independent escrow management services. There are specialized companies that provide escrow management services specifically for surrogacy journeys. Ask your agency or attorney to recommend one or more to you.

When is the money provided to the escrow agent?

Some states (like Illinois) have a requirement as to when the escrow account must be funded. But other states allow for flexibility. Most of the time, the escrow account is funded soon after the signing of the gestational surrogacy agreement. 

How much do the intended parents put in escrow?

The gestational surrogacy contract determines the payment schedule into the escrow account. But most often, at least the entire “base” compensation amount plus about $10,000 more is deposited. There are also provisions that ensure that the intended parents do not let the escrow account balance fall below a certain amount. With some agencies, a much larger amount is required to be deposited in escrow, as the agency will then utilize those funds to pay not just the surrogate compensation, but other expenses on behalf of the intended parents like legal expenses, insurance expenses, etc. 

How long does the escrow account stay open after the end of the pregnancy?

Usually about 6-8 months to ensure that all of the intended parents’ financial obligations are addressed, even if invoices are received several months after conclusion of the pregnancy. 

If there is money left over in escrow, what happens to it?

It is refunded to the intended parents. 

How much does escrow management cost?

Often, when escrow management is provided internally, those services are part of the agency fee. When an independent escrow agent is selected, the fees are usually $1,200 to $1,500 for the entire journey. 

What are the advantages to using an escrow agent?

There are several key advantages to using an escrow agent.

  1. It provides both the intended parents and the surrogate the assurance and security of knowing that the surrogate’s entire compensation package is available and segregated from the intended parents’ other funds. 
  2. It eliminates awkward conversations about money because the intended parents never pay the surrogate directly. If there is a question or an issue about payment, the escrow agent is there is assist.
  3. Quality escrow agents have excellent technology to ensure that the surrogate receives the correct payment amounts on exactly the day they are due. They also allow intended parents to have an easy way to view the payments that have been provided and what they were for, as well as ways to track payments and confirm receipt by the surrogate. 
  4. Escrow agents eliminate the bookkeeping aspects (and headaches) of the financial part of the journey. Surrogacy contracts are approximately 50 pages long, with considerable financial detail. It can be burdensome for intended parents to have to wade through the contract to determine the correct amount and timing of the many payments that are provided during the journey. 

Questions?  Schedule a consultation today, because sometimes it takes a village. 

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