An escrow company is a neutral third party that manages funds for two or more parties. In the world of third-party reproduction, an escrow company will manage funds deposited by intended parents which will be set aside to compensate the surrogate or donor and reimburse them for expenses on the journey. Sometimes instead of escrow companies, attorneys’ trust accounts are used to store the funds. Some states such as California and New York surrogacy laws require funds to be held in a licensed and bonded escrow company or in an attorney trust fund.
The exact compensation terms will be outlined clearly in the surrogacy agreement. The surrogacy agreement will also state how much should be deposited in the escrow account, what the minimum balance is, and how long the escrow account has to stay open, and when payments must be made to the surrogate.
Recently, many intended parents have a legitimate fear that the escrow company of their choice may not fulfill its duties. What if the escrow company’s accounts are frozen, the owner or employee stops responding, or worse, appears to disappear with the money, what should you do?
The best way to avoid issues with your escrow company is prevention and doing sufficient research before choosing an escrow company. You should consider many factors when choosing a reputable escrow company. First, experience of an escrow company team is important because they will know how to handle any issues. A successful escrow team should consist of experts in surrogacy banking, CPA (certified public accountants), and licensed attorneys. Along with experience, you can read client reviews of their experience using the company or ask your attorney for a referral.
Next, a factor to consider is the structure and practices in place. Multi-level security and approvals must be in place for any money to be released from the client’s escrow account. These checks and balances ensure that no single person can commit theft and help significantly reduce potential errors. You can ask whether they have a system that allows for internal checks and balances. This will allow for all levels of management to be watched and prevent potential issues from escalating into larger problems.
Lastly, the escrow company should have insurance and bonding that can cover any potential losses financially. It provides a safety net not only for the company but for your funds. The insurance should cover any potential threats of cyber-attacks or errors made. Be sure to ask for a copy of the bond policy. You can verify whether the bond exists by requesting the policy declaration and calling the bond company.
If you do find yourself in a situation where the escrow company’s account is frozen and payments are not made, and you fear the money is gone here are some steps you can take. Keep in mind the steps can be taken in a different order and multiple steps at the same time.
Immediately attempt to reach your contacts at the escrow company for answers.
Verify with the surrogate or donor if payments were received or not. Ask her to take a screen shot of recent deposits to show that the deposit did not occur.
Screen shot your balance and page, as well as deposit and disbursement history. This will be needed later for proof of what your deposits and the balance you are entitled to, especially if the portal becomes inaccessible.
If you suspect any attempts of fraud and cannot get in touch with your account manager, you can contact the bank where the escrow account is located and inform the account manager you are a beneficiary of the escrow account. Escrow accounts are special accounts at the bank, and the account manager should be able to answer your questions as to the balance of the account and whether it is frozen. If you cannot get through or explain the problem, then ask your attorney for assistance. Either you or your attorney can also request the account be frozen if you believe fraudulent transactions have taken place or are about to take place. You can also provide proof of screen shots of funds not received by your surrogate.
If you believe you are a victim, immediately report it to the authorities such as the local police, the FBI, and the FDIC. You should also contact the bond company that has a bond to file a claim.
You can also contact your bank to attempt to stop any recent wires or ACH transfers
There are other steps such as contacting your agency, finding other intended parents who are in the same situation, and reaching out to your elected officials, news media, and anyone who can help escalate the issue.
In the end, a lawsuit may be necessary to get your funds back, and a plaintiff’s attorney will be knowledgeable about the proper parties to sue for a recovery.
Keep in mind you will continue to have obligations under the surrogacy contract to pay. You may have to speak with your attorney about what to do if you are not able to pay the surrogate’s monthly compensation. Steps such as amending the surrogacy agreement to allow more time to make payments should be considered.
Conclusion
An escrow company are supposed to provide the parties peace of mind that the surrogacy journey is adequately funded. While in the history of surrogacy, escrow companies for years have been safe, unfortunately the risk of fraud or theft exists. It’s best to research your escrow company to minimize risk, and keep in mind that escrow or a trust account will be the best course of action from the surrogate’s perspective. If issues arise, gather evidence to demonstrate the amount of money is at risk. Having an attorney who is responsive when trouble arises in the surrogacy process is priceless. Tsong Law Group has a strong reputation of responsiveness when their clients are in need. Contact us today if you are begining your journey.
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