Solicitors Banking Services, Specialisation Needed
A look at specialist solicitors banking services including escrow and probate accounts.
Banking Expert, Donald Donaldson, takes a look at solicitor banking services.
Solicitors require specialist banking services for a number of reasons. Naturally solicitors need a personal account that suits their method of working but also their professional activities in many cases will also require banking of a specialised nature. Part of the reason behind this is because solicitors often hold client's money during instances such as exchanges of property and the distribution of estates. Property transactions mean that the solicitor will normally have some form of escrow account while estate management requires a probate account. The purpose of both these types of banking is that they mean the client's funds are held by an external party, one that has no vested interest in misusing funds.
The escrow account is one of the most widely used in the legal sphere. It is created to hold onto funds during a property transaction. The definition of an escrow is an agreement between client and solicitor that a third party will hold assets, be they property or funds, for safe keeping during the exchange of a property. In this instance the escrow company is there to act as a neutral body; holding the money until a certain contingency is met. Typically an escrow contract will be drawn up in consultation with both solicitor and clients; this contract will make it clear who is able to access the funds and the conditions that need to be met before the funds are released. Until these conditions are met the escrow banking firm have power of the funds and have a responsibility to hold them securely.
Escrow banking is prevalent all over the world. In the USA it is frequently used by real estate operators, as well as estate agents and solicitors, mortgage companies also utilise escrow banking to pay any relevant taxes and property insurance costs over the mortgage period. It is not just real estate transactions however, any large transaction, be it a business or even a website exchange can utilise an escrow account. Fundamentally an escrow account is needed whenever a neutral party is required in an exchange. The use of the escrow is also expansive in the UK; once again it is primarily concerned with the property industry, especially the private exchange of properties. An example would be when a deposit for a property must be held by solicitors until the transaction has been completed.
As previously mentioned there is another form of banking that is frequently used by solicitors, this is termed as probate accounting. The definition of probate is a legal process that is concerned with the distribution of a person's assets once they have left the mortal coil; in addition a probate also refers to the legal recognition of the rights of solicitors to distribute the deceased's wealth. A probate account then acts in very much the same was as the escrow variety, holding client money until it can be released by the solicitor. Understandably the funds must be held securely by a neutral party until the estate can be distributed by the executor. Fundamentally the third party needs to be neutral so that no misuse of funds occurs and either party, the client or solicitor is given access to the funds until they have been distributed in due legal process.
Hopefully this article has given the reader an idea of the types of solicitor banking services on offer. Both of these forms of account, the escrow and probate are created to ensure that funds are held securely and are not passed on to any other party until the various contingencies are met. Neutrality is key to ensure that no party is ever given an unfair advantage.
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