Believe it or not, some transactions are too large to be conducted with a check or using a conventional bank transfer. These kinds of transactions may include large real estate transactions, gold and oil related trades, or goods that are sold by the millions. Transactions on such a large scale are better conducted by utilizing an escrow account.
Escrow is a process that is used when two parties are making a transaction so large that there is uncertainty of whether one or the other will be able to uphold their end of the deal. In these cases, both parties want to ensure that fraud is not being committed, and that both sides will be satisfied at the end of the deal.
A paymaster is a neutral, third-party individual who is trusted enough hold the funds in an escrow account and distribute the funds once both parties have fulfilled their end of the deal. A paymaster is also responsible for handling the appropriate IRS and tax related documents.
A lot of the times, parties will choose a lawyer as their paymaster. This is because attorneys are held to a higher standard of trust and professionalism. Another advantage is that attorneys already have the knowledge of these tax related laws and regulations, which can allow a transaction to take place quickly and safely. Having a paymaster lawyer involved in the deal also helps ensure that both parties are acting in accordance with the law and are not attempting to commit fraud.
It is also important to ensure that the buyer side has the correct amount of funds for purchase, while ensuring that the seller has the product that they are attempting to sell. While these investigations are taking place, the funds will be held in an escrow account. This is also considered a gesture of good faith by the buyer, showing the other party that they in fact have the funds and intend to purchase.
At the end of deal, a paymaster will take the funds and disperse them accordingly, making sure that all parties receive the correct payment.