Escrow

Escrow is an arrangement in which funds or shares from a transaction are held by a neutral third party, the escrow agent, until agreed conditions are met. The agent, often a bank, law firm, or specialist provider, releases the assets only when the terms of the escrow agreement allow. In private company sales, escrow commonly secures the seller's warranties and indemnities: a slice of the purchase price is set aside so the buyer has a fund to claim against if problems surface after closing.

Escrows typically release in stages over one to two years, matching the periods in which claims can be brought. Escrow also appears in property purchases, large art transactions, and other deals where neither side wants to rely purely on the other's promise.

Why it matters for family offices

For a selling family, escrowed proceeds are real but restricted wealth. The money belongs to the family unless valid claims reduce it, yet it cannot be spent, invested freely, or pledged in the meantime. That dual character makes it easy to misreport: counting escrow as available cash overstates liquidity, while leaving it out understates net worth. The practical answer is to show escrowed amounts in consolidated reporting as their own category, with release dates and any claims noted, so the family and its advisers always know what is truly available.

How it shows up in practice

Suppose a family sells its business and 10 percent of the price goes into escrow, with half scheduled to release after twelve months and the remainder after twenty-four, absent claims. The family office records the escrow agent, the amounts, the release schedule, and the claim deadlines from the purchase agreement. As each release date approaches, the office confirms whether any claims have been notified, then reconciles the incoming payment against the schedule. If the buyer raises a claim, the disputed portion stays behind while the rest releases, and the reporting is updated to reflect it. Treated this way, escrow becomes a tracked position with known milestones rather than a forgotten balance that surfaces as a surprise a year after the deal.