Commingling

Commingling is the act of mixing funds or assets that are supposed to be kept separate, often by someone who holds money or property on behalf of others. It is generally viewed as a breach of fiduciary duty in many legal systems and can carry serious legal and financial consequences.

Common contexts include client funds held by attorneys, real estate brokers, financial advisors, custodians, and banks; escrow accounts used in real estate transactions; charitable and nonprofit funds; and retirement plans. When commingling occurs, it becomes difficult to trace ownership and may expose all funds to claims or losses if an account is insolvent. It can violate laws, regulations, and professional rules, potentially leading to civil liability, disciplinary action, or criminal penalties.

Prevention and compliance measures emphasize segregation and transparency. Key practices include maintaining separate trust or escrow accounts, using clear accounting records and client ledgers that identify each owner’s funds, performing regular reconciliations, and implementing robust internal controls and periodic audits. Policies should align with applicable statutes and professional rules to ensure funds remain identifiable and traceable to their respective owners.