What is the purpose of an escrow in legal agreements?

An escrow serves a critical role in legal agreements by holding assets until a specific, agreed-upon event occurs. This process ensures that neither party can access the assets—such as money, property, or legal documents—until all stipulated conditions are met. By using an escrow arrangement, parties can build trust, as it provides a neutral third party to manage the assets and ensure compliance with the terms of the agreement. This is particularly useful in transactions such as real estate sales or mergers, where significant sums or assets change hands and specific conditions must be satisfied before the transfer is finalized. The key function of an escrow is to serve as a safeguard, ensuring that obligations are fulfilled before finalizing the transfer of ownership or responsibility.