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A trust account is a temporary deposit held by a third party on behalf of two other parties, commonly referred to as a trustee agent. The temporary account remains in place until the process of a transaction is completed and all terms are clarified between both parties. The money or other assets will be withdrawn from this account when the pre-determined legal obligations are fulfilled or the trustee receives the order to release the assets.

A trust account is designed differently than regular accounts. The main difference between a trust account and other types of deposit accounts is that it is temporary in nature and was opened to support a specific transaction. Additionally, third-party administration is not common in other types of deposit accounts.

Escrow Account Features
While a trust account can hold securities, funds, money, and other assets, this temporary deposit is more commonly used in real estate transactions. It is used when a buyer wishes to conduct an inspection or other due diligence on the property, thereby ensuring that he or she has sufficient funds to actually purchase the property. In this way, the seller can be sure that the buyer can buy it if the property is as described and the seller has not wasted time or money. On the other hand, the buyer can rest assured that their money is safe in escrow and will only be handed over to the seller if they are happy with the conditions of the home and ready to purchase.

Use of an escrow account
An escrow account is also used in mortgage transactions between lenders and borrowers. Typically, lenders are the ones who require the borrower to make regular deposits into an escrow account. Deposits are used to pay property taxes and insurance. Another reason to use an escrow account in real estate transactions is when a property is under construction but a buyer already wants to reserve it for themselves. It is possible to deposit a certain amount into the escrow account to ensure that he or she is first in line at the desired property at the time a building is completed.