Interest bearing escrow

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February 05, 2024

by a searcher from University of California, Berkeley - Haas School of Business in Denver, CO, USA

Is anyone aware of/have experience with an escrow service that provides any sort of yield? For a sizeable escrow ($1M+) it would be great to be able to store that in something safe/liquid like a Savings/MM/CD with a target return of 4-5% (currently). If there were claims against that escrow, the interest yielded could help offset. Would be curious who'd pay taxes on that income too?

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Reply by a searcher
from Concordia University in Toronto, ON, Canada
You can mandate the Escrow agent in the SPA to invest in liquid assets such as cashable/no-penalty CD over the Escrow holding period. And they can split the amounts in several lots so in case you need to cash some CDs mid way, say to pay a claim, the rest will continue to gain interest. Whoever receives the interests pays the taxes.
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Reply by a professional
from University of Minnesota in Minneapolis, MN, USA
There's a bank up here in Minnesota that does escrow accounts - For a $1,500 fee, they they have rates of 3.04% APY for amounts over $250k last I inquired. If you're doing $1m, they might do better rates. Ping me if you want an intro.
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