It has come to light that some families who have turned to surrogacy have experienced a tragic scam involving a well known surrogacy escrow company. This heartbreaking situation underscores the critical need for thorough research and caution when selecting a financial service provider for your surrogacy journey.
A surrogacy escrow company is a financial service provider that manages and safeguards the escrow funds related to a surrogacy arrangement as a neutral third party escrow agency to help. These companies act as neutral third parties to ensure that the financial aspects of the surrogacy process are handled transparently and securely for your surrogacy agreement in these escrow bank accounts.
Starting a family through surrogacy is a deeply personal and emotional journey, often requiring significant financial investment. Intended parents place their trust not only in their surrogates but also in the institutions that manage the funds essential to this process like a surrogacy escrow account management company to help them in a timely manner. However, recent events have highlighted the potential risks involved when these funds are not properly secured and caused to identify potential victims in that recent tragedy. But there is another option for future parents, an Attorney Trust Account.
Extraordinary Conceptions had the opportunity to sit down with Stephanie Caballero of the Surrogacy Law Center in order to discuss the concerns that some future parents have shared regarding the safety of their escrow accounts, and how an Attorney Trust Account might be a more secure option.
EC: What is an Attorney Trust Account?
SLC: “An attorney trust account is a specialized bank account that licensed attorneys can apply for, which is subject to State Bar regulation. These accounts are intended to hold client funds that have not yet been earned by the attorney or that are held for the benefit of third parties, such as in a surrogacy arrangement. The interest earned on these funds typically goes toward State Bar initiatives, not to the attorney who owns the account.”
EC: What Is the Difference Between an Attorney Trust Account and an Escrow Account?
SLC: “An escrow account is a type of account that also holds third-party funds until they are earned. Escrow accounts are designed to keep funds secure while transactions are being finalized and before the money is owed. For example, when you buy a house, the earnest deposit is held in escrow until closing. This also applies to surrogacy journeys, where intended parents (IPs) place the estimated fees for the journey into escrow or trust, to be held until payment is authorized for the gestational carriers (GC) or for medical care.
While attorney trust accounts are regulated by the Bar in the state where they are managed, escrow accounts may or may not be subject to regulation. Depending on the state, an escrow account may need to be licensed or bonded to operate. California, for example, has strict licensing procedures for escrow companies, whereas states like Florida and Texas do not have such requirements. Therefore, it is important to research the safeguards that exist for the specific escrow company you are considering.”
EC: Why Are Attorney Trust Accounts or Escrow Accounts Important for Your Family Building Journey?
SLC: “Family building journeys are often expensive, with various fees and reimbursements paid to the surrogate or donor. Establishing an attorney trust account or escrow account provides a way for intended parents to assure their surrogates or donors that the funds needed to meet their obligations under the agreements are secure. It also reassures all parties that the money will not be spent on other things (which cannot be guaranteed when the money sits in the intended parents’ personal bank account). Additionally, the trust or escrow account will hold estimated expenses for medical care and is governed by terms requiring that it remains open for a certain period after the journey is completed to cover any remaining bills.
Without a trust or escrow account, those providing services to help the intended parents build their families are placed in a vulnerable position, where there is uncertainty about whether the funds exist to pay contractual obligations. For this reason, most attorneys require or recommend that their clients utilize these accounts to help create peace of mind. In many states, such as California, third-party agencies are required to direct intended parents to place money into an independent attorney trust or escrow account to ensure that the agency itself cannot improperly handle the money.”
EC: What Protections Are in Place for Attorney Trust Accounts and Escrow Accounts?
SLC: “Attorney trust accounts may only be operated by attorneys and are subject to State Bar regulation and oversight. The State Bar also handles the regulation of attorneys’ licenses and has the authority to suspend or revoke the licenses of attorneys admitted to the Bar in that state. Therefore, attorneys accused of wrongdoing regarding the trust accounts they hold are putting their licenses and livelihoods at risk. The combination of regulation and serious consequences for failing to meet the standards set by the Bar regarding attorney trust accounts should help clients feel that their money is secure while in trust.
Regulation of escrow accounts varies widely by state. Certain states, like Texas—where recent escrow account malfeasance occurred—do not require escrow holders to be licensed. For this reason, it is crucial that intended parents inquire about the security measures in place at the escrow company, what regulations the company is subject to, and what redundancies are used to ensure that a rogue employee or owner cannot steal the funds.”
EC: How Are You Helping Families Affected by Recent Concerns with Surrogacy Escrow Accounts?
SLC: “Beyond sharing the latest news and possible paths toward remedies, the most significant assistance we can offer is to educate potential clients about the importance of working with an attorney trust holder or an escrow holder who has an established reputation and is licensed in the state where they are incorporated. People need to ask about the protections in place, verify licensing status, find out which employees have access to the funds, understand how those funds are administered, and conduct their due diligence. The recent unfortunate situation has underscored the need for thorough research, and the lessons learned may help others avoid similar heartbreak in the future.”
At Extraordinary Conceptions, we understand the critical importance of safeguarding your surrogacy journey. With the recent concerns surrounding the surrogacy escrow company, our team is committed to guiding you through every step of the process with transparency and security. By partnering with trusted professionals like those at the Surrogacy Law Center, we ensure that your funds are managed with the utmost care with thorough help in research, whether through an escrow account or an attorney trust account. Our goal is to provide you with peace of mind so that you can focus on the joy of building your family, confident that your financial arrangements are secure.
The Surrogacy Law Center | Surrogacy Law -Carlsbad, CA (surrogacy-lawyer.com)
