How BP (NYSE:BP) is Funding Escrow Account

With the $20 billion figure being thrown around as to BP's (NYSE:BP) putting it into an escrow fund to pay out to claimants of damages related to the Macondo Gulf oil spill, many assumed the $20 billion is in the fund ready to be distributed, and in fact the company is funding it incrementally.

Here's how they're doing it.

In the third quarter of 2010 they're putting an initial $3 billion into the escrow account, and then in the fourth quarter adding anothe $2 billion.

From then on, starting with the first quarter, BP will put $1.25 billion a quarter into the escrow account until it reaches $20 billion over a four-year period.

$20 billion isn't an agreed upon cap, and it isn't limited to that in liabilities.