In finance, the word escrow refers to arrangements by which assets are placed in the trust of a neutral third party (normally a financial intermediary) until certain conditions have been met. Once conditions are met, assets are transferred to a beneficiary.

Typically, escrow arrangements involve three parties: A buyer, a seller and an escrow agent. Assets paid by the buyer are held in escrow by the escrow agent until the seller fulfills their contractual obligations. The escrow agent insures that the seller receives the promised payment but only after they have delivered the promised goods or services.

This term is often used in reference to real estate transactions in which money paid for a property is held by an intermediary over a fixed withdrawal period. If all of the conditions attached to the transfer of the assets are met, the escrow agent transfers the money from the buyer to the seller. If conditions are not met, the escrow agent returns the money to the buyer.

In stock market transactions, financial intermediaries (typically stock exchanges) act as escrow agents to ensure that sellers receive payment once they have transferred the promised securities to buyers. An escrow may also be used in corporate acquisitions to ensure that the shareholders of the target company only receive payment for their shares after the company fulfills the terms of the acquisition and vice versa.

Peer-to-peer lending intermediaries act as escrow agents to ensure that borrowers receive their loans and that lenders receive loan repayments and interest. Peer-to-peer currency exchange service providers act as escrow agents to ensure that both parties deposit and receive the promised currency as per the exchange agreement.

A number of Swiss law firms provide escrow services and some Swiss banks provide escrow accounts. These services can be adapted to many different arrangements between parties to commercial agreements.

In a broader sense, an escrow arrangement may involve just two parties. This is the case, for example, with Swiss pillar 2 and pillar 3a retirement savings. Money set aside for retirement is held by a pension fund or vested benefits foundation (in the case of pillar 2 savings), or a bank, retirement fund or insurance company (in the case pillar 3a savings). These financial services providers act as escrow agents. If requirements for withdrawal of assets are met (when you reach legal retirement age or buy a primary residence, for example), the escrow agent transfers the money back to the depositor.

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Editor Daniel Dreier
Daniel Dreier is editor and personal finance expert at