Escrow in United States

Escrow Definition

The delivery of a deed or other instrument, actually executed and ready for delivery to a stranger ( according to the definition of Escrow based on the Cyclopedic Law Dictionary ) to the instrument, to be by him delivered to the person for whose benefit it is made, on the performance of a condition, or the happening of a contingency, or to be redelivered to the depositor on failure thereof.

Concept in Plain-English Law

A document (such as a grant deed to real property) or sum of money that, by agreement of parties to a transaction, is held (Escrow as defined by Nolo’s Encyclopedia of Everyday Law, pages 437-455) by a neutral third party until certain conditions are met. Once the conditions are met, the third party releases the funds or document from escrow.

Practical Information

A conditional delivery of something to a third person to be held until the happening of some event or the performance of some act. To place an instrument or fund in escrow is to deliver the instrument or fund to a person charged with its custody and disposition under the terms of a specific agreement, known as the escrow agreement. For example, a grantor (in U.S. law) may deliver a deed (in U.S. law) in escrow to a trust company until the grantee makes certain payments on the purchase price, at which time the trust company delivers the deed to the grantee.
Necessary components of escrows for the sale of real property (in U.S. law) are:

1. A valid and enforceable contract for the sale of land,

2. An escrow agreement,

3. A disinterested third party, usually a bank, to act as escrow holder (escrowee). Neither buyer nor seller nor their agents or attorneys can act as escrowee.

Many banks, trust companies, building and loan associations, and title companies maintain special departments for escrow transaction.

Escrow upon exchange of property. Placing the transaction “in escrow” is particularly helpful in a deal involving the exchange of real estate in one city for property in another city. When title (in U.S. law) on both properties has been cleared and all the details attended to, arrangements can be made by telephone between the escrow agent in one city and the correspondent in the other city for simultaneous recording of the deeds. (Revised by Ann De Vries)

Escrow Payments

Rules governing reporting payments to attorneys have been extraordinarily controversial. Among the more debated provisions is section 6045(f). Enacted in 1997, it requires most payments to attorneys to be reported on the dreaded Form 1099. Unfortunately, the concept-theoretically so simple-has turned into a mess. The issue can have a huge impact on a taxpayer’s ability to structure a settlement that won’t be whipsawed by the alternative minimum tax.

In 2004 were issued more regulations on reporting payments made on behalf of others, or Middleman regulations. (T.D. 9010, 2002 TNT 144-10 (2002).)

There were a well-publicized rift between the federal circuits over whether the portion of a damages award or settlement payment used to pay a plaintiff’s attorney fee must be included in the plaintiff’s gross income or whether only the net amount received must be reported. (Compare Sinyard v. Commissioner, 268 F.3d 756 (9th Cir. 2001), cert. denied, Sinyard v. Rossotti (536 U.S. 904 (2002) (including fees); Estate of Clarks v. United States, 202 F.3d 854 (6th Cir. 2000) (excluding fees).) .

Escrow in Foreign Legal Encyclopedias

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Resources

What is Escrow?

For a meaning of it, read Escrow in the Legal Dictionary here. Browse and search more U.S. and international free legal definitions and legal terms related to Escrow.

Further Reading

• Information about Escrow in the Gale Encyclopedia of American Law.

Escrow Collections in the context of Real Estate

Resurces

See Also

• Impound Account

Escrow in Mortgage Law

In the field of mortgage refinancing, a concept of Escrow may be the following: The holding of money or documents by a neutral third party before closing on a property. It can also be an account held by the lender (or servicer) into which a homeowner pays money for taxes and insurance.

Escrow in Mortgage Law

In the field of mortgage refinancing, a concept of Escrow may be the following: The holding of money or documents by a neutral third party before closing on a property. It can also be an account held by the lender (or servicer) into which a homeowner pays money for taxes and insurance.