Escrow Refunds in a Divorce: Who Should Receive the Check?
When a marital home is sold or refinanced, there’s often money sitting in the escrow account—prepaid property taxes and/or homeowners insurance. At closing (or shortly after), the lender typically issues an escrow refund.
Why this can become a dispute
Refunds are usually made payable to the mortgage holder(s). That might be both spouses or just one—and this overlooked asset can spark conflict if the check lands in only one name.
Two common scenarios to expect
Joint mortgage, one payer post-separation: The loan remains in both names, but only one spouse has been making the payments. It may be equitable for that paying spouse to keep the refund.
Single-name mortgage, paid with marital funds: Only one spouse is on the loan, yet the mortgage has been paid from marital income (sometimes by the spouse not on the loan). If the home sells soon after separation, the refund check will be issued to the named borrower, but most or all of that refund is marital and should be split.
Handle it in the settlement documents
With taxes and insurance costs rising, escrow refunds can be significant—so address them during the divorce process.
If a refund has already been issued to one spouse, list it as an asset for division.
Title companies can disburse the escrow refund per the divorce decree—provided the decree explicitly states how the refund is to be handled.
If you use a separation agreement that isn’t incorporated into a court order, it still creates a contractual roadmap for splitting the refund.
Bring in the right expertise
A Certified Divorce Financial Analyst® (CDFA®) can flag details like escrow refunds before they become problems and help quantify what’s fair. Careful attention to items like this can preserve value—often more than the cost of the professional’s fee.
FMD Wealth Advisors can coordinate with your attorney to inventory marital assets, document escrow refunds clearly, and ensure your settlement reflects how (and to whom) these dollars should be paid. Book your Free Consultation here.
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