A Starion Bank escrow account can give you peace of mind that the crop you harvest in the fall will reap the most financial benefits for your farm.
Placing your grain or livestock sale proceeds in an escrow account allows you to control:
- Timing of your sales, which can affect prices you receive
- Tax year in which you’ll take farm income
- Date you receive your funds to pay loans or use for debt servicing
Your grain sale proceeds can go immediately to the bank in the fall, where they are held safely and securely in escrow until a future date that you determine.
How does it work?
- You complete a Starion Bank escrow agreement that names us escrow agent. This tells the buyer to prepare a check payable to Starion at the time you make a grain or livestock sale. We then place the funds in an escrow account. A separate escrow agreement is prepared for each elevator or sale barn.
- A grain or livestock delivery form tells when the escrow agent (Starion) should transfer the funds to you. For example, you might decide on January 2 of the coming year as the release date.
You may tell your loan officer to apply the funds to your operating loan on that date, or place the funds in your farm checking account or interest-bearing account for other purposes.
How is the money held?
Funds are placed in a non-interest bearing escrow account at Starion Bank. Laws specify that you cannot earn any interest or investment income on the escrow deposit. (Since you aren't yet the "owner" of these funds, you also can't use them as collateral or to obtain a letter of credit.)
The benefits of an escrow agreement are:
- You plan ahead for the date to receive the grain or livestock sale proceeds for the purposes of tax planning.
- Your money is FDIC insured up to $250,000, so you know it's safe and secure.
- You can earmark the funds to pay your operating loan on a date you specify, controlling interest expense.
There are many ways to take advantage of an escrow agreement. Contact your Starion Agribusiness Banker to learn more about the program.