Legal Definitions - commingling

Definition: Commingling is when funds belonging to one party are mixed with funds belonging to another party. This is often seen when a fiduciary improperly mixes their personal funds with funds belonging to a client. This violates ethical rules and can lead to unexpected loss of funds.

Example 1: A lawyer mixes their personal funds with funds belonging to their client. This violates Rule 1.15(a) of the Model Rules of Professional Conduct, which requires lawyers to keep their clients' property separate from their own property. This can lead to the unexpected loss of client funds.

Example 2: In community property states, certain assets acquired during a marriage are viewed as jointly owned by both spouses. If a spouse mixes their separate property with marital property, such as in a joint bank account, they risk forfeiting some of the separate property in the event of a divorce. For example, in California, property acquired during a marriage is presumed to be community property and must be proven otherwise.

Both examples illustrate how commingling can lead to unexpected loss of funds or property. It is important to keep separate property and funds clearly separated to avoid any legal or ethical issues.