How do I set up a trust or escrow account to hold sale proceeds for estate distribution? - Pennsylvania
The Short Answer
In Pennsylvania probate, sale proceeds that belong to an estate are typically held in an properly titled estate account under the personal representative’s control—not in an informal “escrow” you create on your own. While there are situations where proceeds may be held in a formal escrow arrangement (often through a lawyer’s trust account or a court-directed arrangement), the personal representative still must be able to account for and safeguard the funds before distribution.
What Pennsylvania Law Says
Under Pennsylvania’s Probate, Estates and Fiduciaries Code, the personal representative (executor/administrator) is responsible for taking control of estate assets, preserving them, and managing them during administration. That includes handling cash proceeds from the sale of estate property and keeping those funds in a way that is traceable and appropriate for later accounting and distribution.
The Statute
The primary law governing how estate funds may be held (including in bank deposits) is 20 Pa.C.S. § 3316.
This statute establishes that a personal representative may place estate funds in certain permitted, conservative holdings—such as an interest-bearing deposit at a Pennsylvania financial institution—consistent with the duty to liquidate and distribute the estate promptly.
Why You Should Speak with an Attorney
Even if your goal is simple—“hold the sale proceeds until we can distribute them”—the legal risk is in how the money is held, who controls it, and whether the paper trail will survive objections later. Legal outcomes often depend on:
- Strict Deadlines: Pennsylvania estates often move toward a formal accounting and proposed distribution, and timing can matter—an account generally cannot be filed until at least four months after the first complete advertisement of the grant of letters. See 20 Pa.C.S. § 3501.1.
- Burden of Proof: The personal representative must be able to prove what came in (sale proceeds), what went out (taxes, liens, expenses), and what remains for beneficiaries—typically through an inventory and later accounting. See 20 Pa.C.S. § 3301.
- Exceptions: Distributions can be complicated by creditor claims, inheritance tax issues, disputes among heirs, or special situations (like an unknown/absent beneficiary), which may require court involvement and can change whether an “escrow” is appropriate at all.
Trying to route proceeds into the wrong type of account (or letting the wrong person control the funds) can create accusations of mishandling estate assets, delay distribution, or trigger objections in Orphans’ Court. A probate attorney can structure the holding of funds so it matches Pennsylvania fiduciary duties and can be cleanly explained in the estate’s accounting.
If you want more background on related issues, you may also find these helpful: distributing proceeds directly vs. using an estate account and when escrow funds can be released in a PA probate sale.
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Disclaimer: This article provides general information under Pennsylvania law and does not create an attorney-client relationship. Laws change frequently. For legal advice specific to your situation, please consult with a licensed attorney.