Surrogacy represents a significant financial commitment, and the possibility of an arrangement ending before a baby arrives can feel overwhelming.

The good news is that most surrogacy agreements include clear provisions for refunding unused escrow funds to intended parents.

Understanding how escrow works, what protections exist for your money, and how agencies like American Surrogacy manage these funds can help you move forward with confidence.

Get answers to your specific questions about surrogacy costs and fund management. Contact us today.

What Happens to Escrow Funds if a Surrogacy Agreement Terminates Early?

When a surrogacy agreement ends before embryo transfer or birth, any unused funds held in escrow typically return to the intended parents. The exact timeline and process depend on your surrogacy contract and gestational carrier agreement.

Most professional surrogacy agreements spell out when funds can be released back to intended parents, like when a surrogate is medically disqualified before transfer, when either party exercises their right to terminate, or when both parties mutually agree to end the arrangement.

The disbursement process usually happens within 30 to 60 days after termination, though this varies based on your contract and whether there are disputed expenses. Your surrogacy attorney can walk you through the specific refund provisions in your agreement.

Some escrow funds may have already been distributed for completed services, like surrogate screening fees, insurance premiums, or legal costs, and those typically aren’t refundable.

But compensation payments, medical expense reserves, and other milestone-based funds that haven’t been earned or spent should return to you.

How Escrow and Fund Management Work in Surrogacy

Escrow serves as a neutral holding space for surrogacy funds. Intended parents deposit money upfront, and those funds are distributed as the surrogate reaches specific milestones like the embryo transfer, pregnancy confirmation, delivery, and so on.

This system protects everyone involved. Surrogates know their compensation is secure. Intended parents know their money won’t be released until agreed-upon steps are completed.

You have options for how these funds are managed. Some intended parents work with third-party escrow companies.

Others choose agency-based fund management, where the surrogacy agency handles deposits and disbursements directly.

American Surrogacy’s Accounting Services

At American Surrogacy, we offer in-house fund management with the same accountability and milestone tracking as third-party escrow—but with tighter integration into your journey timeline.

We’ve successfully managed client funds for years across both our surrogacy and adoption programs.

The key difference between escrow and agency fund management often comes down to personal preference and state requirements. Both approaches work well when managed by experienced professionals.

Do All States Require Escrow for Surrogacy?

Not all states mandate that surrogacy funds be held in a licensed escrow account, though some have specific legal requirements.

States like Washington have detailed statutes governing gestational surrogacy agreements and may require escrow provisions.

Even without strict mandates, most surrogacy professionals—attorneys, agencies, and fertility clinics—strongly recommend using managed fund systems. They create clear paper trails, reduce payment conflicts, and ensure surrogates receive compensation reliably.

Your surrogacy attorney should know your state’s surrogacy laws and can advise whether escrow is legally required or simply best practice.

In states without explicit escrow requirements, you’ll still want to choose a reputable fund management option for financial security and peace of mind.

Agency Fund Management vs. Third-Party Escrow: What’s the Difference?

Third-party escrow agents are independent companies that hold and distribute funds for surrogacy arrangements.

They operate as neutral parties with no connection to your agency or fertility clinic. Agency-based fund management functions similarly but keeps your funds in-house with enhanced protections.

We track the same milestones, process payments on the same schedule, and maintain the same oversight—without moving your funds to an outside entity. This helps protect you against financial losses like what happened with SEAM.

Some intended parents still prefer the added separation of third-party escrow. Both models work—what matters is your comfort with the structure and confidence in who’s managing your money.

Whichever route you choose, look for transparent accounting, regular statements, and clear communication. You should never feel uncertain about where your money is or when it’s moving.

How American Surrogacy Protects Your Funds—Even in Crisis

When SEAM Surrogacy Escrow Account Management, a widely used third-party escrow provider, was discovered to have embezzled millions of dollars from client accounts in 2023, it sent shockwaves through the surrogacy community.

Families who trusted SEAM suddenly faced the devastating reality that their money was gone.

American Surrogacy was among the agencies affected, but we made an immediate decision: we reimbursed every impacted family from our own operating budget. Our clients didn’t lose a cent.

We did this because we believed agencies had a responsibility to stand by their clients. Unfortunately, not every surrogacy program took this approach. Some families working with other agencies are still fighting to recover their losses.

This experience reinforced why we continue offering in-house fund management alongside third-party escrow options.

What to Look for in a Surrogacy Escrow Agreement

Every surrogacy contract should include specific language about fund management and what happens to unused escrow in various scenarios. Before you sign, make sure your agreement addresses these key points:

Refund Policies for Early Termination

The contract should clearly state that unused escrow funds will be returned if the arrangement ends before completion. Look for language specifying timelines, typically 30 to 60 days, and any conditions that might affect refunds.

Disbursement Authority and Milestone Definitions

Who has the authority to release funds, and under what circumstances? Your agreement should define each payment milestone and explain what documentation is needed before funds can be distributed.

Handling of Disputed Expenses

Your contract should outline how disputes are resolved and whether funds can be withheld pending resolution.

State-Specific Legal Requirements

If your state mandates escrow accounts or imposes specific regulations on fund management, your agreement needs to reflect those requirements.

Reserve Fund Provisions

Many agreements include reserve amounts to cover unexpected medical expenses. The contract should explain how much is held in reserve, when it can be used, and what happens to it if those expenses never materialize.

Your surrogacy attorney is your best resource for understanding these provisions and making sure your agreement protects your financial interests.

Having an experienced lawyer review your contract is one of the most important investments you’ll make in your surrogacy journey.

Protect Your Surrogacy Investment — Talk to Us About Secure Fund Management

Understanding what happens to escrow funds if a surrogacy agreement terminates early is part of being an informed, prepared intended parent.

At American Surrogacy, we’ve built our fund management systems around transparency, accountability, and protection for your investment.

If you’re ready to explore surrogacy with an agency that takes your financial protection seriously, we’re here to answer your questions.

Fill out our simple form today to get answers to your escrow questions.