Both a licensed escrow company and an attorney trust account can hold money while a transaction is completed. They are not the same thing, and the difference matters when you choose one.
Licensed escrow companies
In California, escrow companies are licensed by the Department of Financial Protection and Innovation under the Escrow Law (Financial Code section 17000 and following). They act as a neutral holder for both sides and follow standard instructions. They are a good fit for home sales, ordinary business sales and other transactions with well established procedures.
Attorney trust accounts
A California attorney who holds money for a client in a bona fide attorney client relationship is governed by the State Bar's trust account rules instead. The attorney acts for the client, not as a neutral party for everyone, and holds or pays the funds as the written agreement with the client provides. The Escrow Law treats an attorney acting for a client differently from a company in the business of escrow.
Which fits your transaction
| Escrow company | Attorney trust account | |
|---|---|---|
| Acts for | Both sides, as a neutral holder | The attorney's client |
| Best suited to | Standard real estate and business sales | Custom, commodity and international transactions where a client wants its own lawyer involved |
| Rules | Escrow Law and DFPI regulations | Rules of Professional Conduct and State Bar oversight |
| Instructions | Standard escrow instructions | A written agreement drafted for the transaction |
Questions to ask
- Do you need a neutral holder for both sides, or do you want your own attorney?
- Are there several beneficiaries, brokers or international parties?
- Does the transaction need terms that standard escrow instructions do not cover?
If you are unsure, call and describe the deal. If an escrow company is the better fit, you will be told so.