What is an Escrow and Why Does it Have My Check?

What is “escrow” and why does my settlement check have to go there?

To stay secure and protect clients,  good lawyers maintain a “trust account” with a reputable bank. Lawyers are not allowed to gain interest on these accounts, as that could incentivize some lawyers to take their sweet time distributing money.  Trusts, also known as escrow accounts, are where the Abrams Landau firm holds a client’s settlement funds for distribution.

This almost never happens in a Worker’s Compensation case, where the money is sent directly to the worker and the attorney for costs and legal fees. However, in car crash cases, bike accidents, and other negligence cases, the settlement check often has to go through a trust account, which takes a week or more.

This is because large settlement checks in negligence cases need to “clear” the bank, meaning the funds must be deposited into the trust account before they can be disbursed. If there are no claims against these funds, other than what is to be distributed to the client and the law firm, the money can then be disbursed via an escrow check.

In order to make sure that the handling of money is done properly, Melissa Landau, bookkeeper,  uses trusted professionals for the firm’s financial processes. ABRAMS LANDAU is using Paychex for the payment of the staff salaries, and also utilizes Kozitska Wicks, a conservative, highly regarded accounting firm in Alexandra. Kositska Wicks has been advising Lawyer Landau since the 1980s!

One of the quickest ways a lawyer can lose their license is by mishandling their escrow account, failing to properly account for the money, or taking money before it has been earned. To expedite the receipt of settlement funds, the Abrams Landau team often has clients sign a limited power of attorney, giving Mr. Landau permission to deposit the settlement check into the escrow account. This check usually includes his name, the law firm’s name, and the client’s name, allowing the injured victim to avoid a trip to the office just to endorse the insurance company’s draft for the claim.

Sometimes there are checks from multiple defendants or insurance companies, received at different times, which can create a significant hardship for many of ABRAMS LANDAU’s injured and disabled clients. To further ease the burden, the team will often ask the client whether they prefer to pick up their net settlement or recovery check, have it mailed, or have it delivered by another method.

Doug Landau has been known to personally deliver large settlement checks across the country, including on the race course at the Winchester Apple Blossom Festival, over ice cream in Orange County, and to law offices in the District of Columbia and beyond.

These checks must be endorsed exactly as written by the insurance company, and there are specific laws that govern trust accounts, escrow checks, and how lawyers handle clients’ money separately. While the process can be time-consuming, it ultimately aims to protect the client. If you or someone you know has questions about a negligence case or trust accounts in personal injury litigation, please contact us at frontdesk@landaulawshop.com or call 703-796-9555.