Free US Law Dictionary

Commingling

Commingling literally means "mixing together". Used in a legal context it is a breach of trust in which a fiduciary mixes funds that he holds in the care of a client with his own funds, making it difficult to determine which funds belong to the fiduciary and which belong to the client. This raises particular concerns where the funds are invested, and gains or losses from the investments must be allocated. In such circumstances, the law usually presumes that any gains run to the client and any losses run to the fiduciary who is guilty of commingling.

The problem of commingling is of particular concern in the legal profession. Attorneys are strictly prohibited from commingling their clients funds with their own, and such activity is grounds for disbarment in virtually every jurisdiction, because of the ease of embezzlement and the difficulty of detection. Similar rules apply for licensed real estate brokers handling earnest money and other professionals who hold deposits as agents for clients in absentia.

Commingling is also evidence that may be used in "piercing the corporate veil" of a sham corporation, where a person vainly attempts to shield himself from personal liability through "incorporation", yet fails to observe strict separation of corporate and personal property or accounts, among other improprieties.