Commingling


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Commingling

Combining things into one body.

The term commingling is most often applied to funds or assets. When a fiduciary, a person entrusted with the management of funds other than his or her own in trust, mixes trust money with that of others, the fiduciary is commingling funds and thereby breaching his or her fiduciary duty.

A member of a corporation's board of directors commingles funds when he or she mixes personal funds with the funds of the corporation. An attorney who commingles his or her money with money belonging to a client is violating the ethics of the legal profession.

commingling

n. the act of mixing the funds belonging to one party with those of another party, or, most importantly with funds held in trust for a another. Spouses or business partners may commingle without a problem, except that a spouse may thus risk turning separate property into community property (transmutation), and a business partner may have to account to the other. However, trustees, guardians, or lawyers holding client funds, must be careful not to commingle those funds with his/her own, since commingling is generally prohibited as a conflict of interest. Use of commingled funds for an investment, even though it benefits both the trustee and the beneficiary, is still improper. Inadvertent commingling or temporary commingling (say, upon receipt of a settlement check in which both the client and attorney have an interest) require prompt separation of funds and accounting to the client or beneficiary. To avoid commingling, trustees, lawyers, guardians and those responsible for another's funds set up trust accounts for funds of another.

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