Solicitor Banking; Escrow, Probate And Protecting Client’s Money
The specialist banking services for the solicitor vary immensely. Not only does the solicitor require an account allowing them to control their own finances but they also must hold client’s money during property transactions and during the calculating of estates, in terms of wills and testaments. The solicitor uses this type of banking normally for two reasons; the first is for property transactions whilst the second is for the distribution of estates. Normally the former is labelled as an escrow account whilst the latter is termed a probate account. In both cases the account is created to hold client finances until the fees can be released.
The escrow account is specialised for of solicitor banking designed for the holding of finances during property transactions. It is defined as a legal arrangement between the client and solicitor in which an asset; be it finances, property or anything of value is deposited into an account for safe keeping. The bank in this case acts as a neutral third party and as such plays an important role in securing the asset from any external party until a contingency is met. The escrow contract will define exactly who is able to access the account, however only after the contingency has been met. It is the escrow agent, acting as a third neutral party who holds sole power over access to the asset.
The escrow form of banking is used all over the world. In the United States it is used extensively in the real estate industry, more specifically by mortgage companies who will use this form of banking to pay property taxes and insurance costs over the term of the mortgage. Additionally escrow companies are expansively used in the transaction of business and personal assets, not purely property, for instance an escrow company may handle the transaction of a website or business; in fact any instance that requires a neutral party to control the transaction. In the UK the escrow from of banking is also used in the property industry, normally controlling private property transactions, holding solicitor client’s money, for instance a deposit up until the sale has been secured.
The other predominant form of solicitor banking is probate accounting. Probate is defined as a legal process that involves the selling of a person’s estate once they have died; in most cases it is the legal recognition of a will by the court, noting the authenticity of the client’s instructions and confirming the power of the executer to distribute the estate in accordance with the will. A probate account therefore acts in much the same way as an escrow variety, it is there to hold the finances of the estate until the probate is granted and the executor is able to distribute the assets. For the same reasons as the escrow it is important that a neutral third party hold these funds, so that family members are protected from an unscrupulous executor while the solicitor is also protected from any claims or law suits.
It is hoped that this information has given an insight into the world of solicitor banking and why it is necessary for solicitors to have their own forms of banking. Fundamentally it about protecting both parties from any legal allegations; if a neutral third party is used then neither party has grounds to lodge a complaint for misuse of funds. It is thanks to both escrow and probate accounts that the messy dealings of property and testaments are made that much clearer and simpler.
Financial and legal expert Thomas Pretty looks at varieties of solicitor banking and the uses of these services to hold onto client’s money securely.