Escrow Agreement & Trust Agreement in the US.

By Miguel Ortega from Wardenclyffe, Inc.

Escrow Agreement

An escrow agreement is an agreement that outlines the duty in which depositor transfers an asset to the escrow agent (“agent”) and the agent has to release the asset to the beneficiary when the agreement’s conditions are met by the corresponding party. The assets, subject of the agreement, can be anything that has value, such as money, checks, stock, deeds, mortgages, patents, etc.

Escrow agreements are commonly used in business and real estate deals due to the assurance that provides to all the parties involved. The parties will agree that the depositor will transfer funds to the escrow agent and give instructions on how and when to disburse the funds to the beneficiary. It is important to mention that the escrow agent is also bound to the terms of the agreement.

Trust Agreement

A trust agreement is a contract in which the trustor/settlor transfers its assets to the trustee, whose purpose is either to protect and conserve the assets or to manage them. Once a certain period of time has elapsed or the occasion of certain terms have been met, the assets or a part of them should be disbursed to the beneficiary. The same person or entity can participate as the settlor and beneficiary.

There are two types of trust agreements: revocable trust and irrevocable trust. the revocable trust can be revoked or modified by the trustor/settlor at any time. On the other hand, the irrevocable trust cannot be revoked or modified by the trustor/settlor, and may only be terminated by the consent of the beneficiary.

Escrow Agreement v. Trust Agreement

As defined earlier in this article, the escrow agreement plays an important role by providing assurance to all parties involved in a transactional deal or agreement that all terms and conditions are going to be met. The escrow agent is an impartial and unbiased party, acting as a conduit to ensure that all of the aspects of the agreement are satisfied before closing.

The trust agreement is commonly used in for two circumstances: to hold or manage funds, which will be disbursed under certain terms or after a period of time, and/or to deposit funds for a service only to be paid on completion of service. Oppositely from the escrow agent, the trustee is responsible for maintaining the assets so that they benefit the beneficiary above all. Therefore, the duties of a trustee may only pertain to one party.

For any question regarding these agreements, you can contact us at info@wardenclyffefirm.com