The Case Against Attorney Held Escrows

There is an inherent conflict when escrow in a Surrogacy is held by the attorney for either party and especially when the escrow company is the Intended Parent’s attorney. Surrogates should be careful when agreeing to a match to determine that escrow is not only in place, but is held by a neutral and independent party, and administered by that third party or their Agency.

The Intended Parent’s attorney is not a neutral party when it comes to holding escrow. Intended Parent’s attorneys work to represent them, and their interests in the Gestational Surrogacy Arrangement, and as such, when they hold escrow, continue to represent their client’s interests above all other parties.

A primary issue is if the attorney-held escrow requires the Intended Parents to approve each expense, especially if this expense is already listed in the contract. Some attorney-held escrows will tell you they require a different level of verification to ensure their client funds are secure. But this runs counter to the terms of the Gestational Agreement. In the Gestational Agreement, the Parties have already come to terms on the agreed expenses, and timetables for the payments of these expenses. If now the escrow manager must get approval from the Intended Parents to send each expense, this can be a conflict of interest for the surrogate’s representation, and cause her an undue burden to have to request funds that should be automatic to her each month, such as the monthly allowance.

Consider this example: if the contract allows a hotel costing up to $150/night, and that is what the Surrogate has spent on a hotel, what happens if the Intended Parents then deny that approval? The contract already said it was allowed, now Intended Parents say no. On a technical level, the Intended Parents attorneys are assisting with a breach of the agreement by the Intended Parents, if expenses agreed to in the contract are not approved by them. That is on a small scale, but the issues can be even more complex at a higher level of problem.

For example – surrogate delivers and there is a birth injury to the child. For the sake of this argument let’s say the injury is not due to the surrogate but Intended Parents refuse to release her final payment even with doctor’s confirmation injury was not caused by her actions. Where is the neutral third party in this scenario to determine that those funds are
due to the surrogate? At that point, now the problem is probably headed to lawsuits, and as the escrow is held by their attorney (and potentially representing them in the lawsuits) and they are also escrow holder, that gets complicated.

Thus, the best interest of every party is that escrow is held by a neutral third party. Surrogates should carefully consider if they will match with clients whose preference is to have Intended Parent’s attorneys hold their escrow accounts, because it puts them at a disadvantage if there was an issue with payment. The contract, previously agreed to by all parties, should be the final, and only say of what is approved and not approved. There should not be any second ask of Intended Parents in a truly fair and balanced escrow holding agreement.

Kristen Hanson
Simple Surrogacy